Distributions from Traditional IRAs are subject to ordinary income tax. That is because these type of IRAs have pre-tax money deposited in them. And if you withdraw prior to age 59½ are subject to a 10% penalty, in addition to applicable federal and state taxes. Under the following circumstances, you may be able to avoid the penalty on early withdrawals:
Ø Turn 59 ½
Ø First-time home purchase
Ø Qualified education expenses
Ø Death or disability
Ø Unreimbursed medical expenses
Ø Health insurance, if you're unemployed
Ø Leave it behind for heir
If the withdrawal is a purpose other than above, we recommend the option of drawing a loan against the IRA account, loan is usually cheaper than paying ordinary tax + 10% penalty on IRA withdrawal.
Starting at age 59½, you can begin taking money out of your retirement accounts without penalty. Keep in mind that you'll have to pay any federal or state taxes that might be due. Starting at age 70½, owners of Traditional IRAs must begin making withdrawals, also known as minimum required distributions (MRDs), from their accounts. These withdrawals are mandatory and violations incur severe penalties.