There are certain taxes and limitations about when you can withdraw funds from certain IRAs.
Premature distribution tax
You decide when and how much to withdraw from your traditional and Roth IRAs, but taxes and penalties imposed by the federal government will likely influence your decision-making process. A 10 percent premature distribution tax is generally assessed on the taxable portion of any distribution you take from a traditional or Roth IRA prior to age 59½. This tax is over and above regular federal income tax. There are a number of exceptions to the tax, however.
Caution: Special rules may apply if you convert or roll over funds from a traditional IRA to a Roth IRA and then withdraw funds from that Roth IRA within five years of the conversion.
Required minimum distributions
Like many people, you may want to keep your funds in your IRAs for as long as possible to maximize tax-deferred growth and/or preserve the funds for your beneficiaries. Unfortunately, the federal government does not allow you to do this. The required minimum distribution rule states that when you reach age 70½, you must begin taking minimum annual withdrawals from your traditional IRAs (this rule does not apply to Roth IRAs). These annual withdrawals are based on a life expectancy calculation and are intended to dispose of your traditional IRA balance over a given period of time. You can always withdraw more than the required minimum in any year, but if you withdraw less, you will be subject to a 50 percent penalty on the shortfall.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.