Rules for IRA Withdrawals | The Motley Fool

Avoid the early withdrawal penalty by knowing these rules.

By Kailey Hagen – Updated Sep 3, 2025 at 9:41 AM | Fact-checked by Margo Winton Parodi

Key Points

RMDs are mandatory from age 73 in traditional IRAs, but not in Roth IRAs.
Failure to withdraw full RMDs results in a 25% penalty, reducible to 10% if corrected within two years.
Early IRA withdrawals face a 10% penalty unless exceptions like higher education costs apply.

Contributing to an individual retirement account (IRA) is a great way to increase your retirement readiness. But if you want to get the most out of your IRA, then you also need to understand the rules surrounding IRA distributions. Failure to meet the applicable requirements could result in costly penalties that unnecessarily rob you of your savings. Here are some of the most important IRA distribution rules.

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An infographic explaining when you can take penalty-free distributions from your IRA (individual retirement account). — Image source: The Motley Fool

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About the Author

Kailey Hagen, CFP, is a contributing Motley Fool retirement analyst covering Social Security, Medicare, and retirement planning. Before The Motley Fool, Kailey was a research analyst for Reviews.com focusing on credit and banking products. She is a Certified Financial Planner® and holds a bachelor’s degree in English from the University of Wisconsin-Madison.

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When can I withdraw from my IRA without penalty?

You can take penalty-free distributions from your IRA if any of the following apply to you:

You're age 59 1/2 or older: Once you reach this age, your withdrawals are no longer considered early and you won't owe a penalty, although you'll still pay income tax on traditional IRA distributions.

You're withdrawing contributions only: This rule is applicable only to Roth IRAs, since you already paid taxes on those contributions. You can withdraw these contributions tax- and penalty-free at any time. You face penalties only if you withdraw earnings early.

You're inheriting an IRA from a deceased person: Inherited IRAs have their own rules regarding distributions but still allow those younger than 59 1/2 to make penalty-free withdrawals.

You have become permanently disabled: The government allows penalty-free distributions to any IRA owner who becomes totally and permanently disabled.

You're using the funds to pay for higher education: Using your IRA funds for higher education, like college tuition, qualifies you for penalty-free distributions.

You take substantially equal periodic payments (SEPPs): If you receive equal payments every year until you reach age 59 1/2, or for five years, whichever is longer, then you can take money out of your IRA penalty-free regardless of your age.

You're using the funds to purchase your first home: If you withdraw money from your IRA to purchase your first home, then the first $10,000 of earnings you receive is exempt from the early withdrawal penalty.

You have large, unreimbursed medical expenses: If you incur out-of-pocket medical expenses in excess of 7.5% of your adjusted gross income (AGI) in 2024 or 2025, you can withdraw IRA funds to cover these costs without paying the penalty.

You're using the funds to pay health insurance premiums: If you are unemployed and paying out-of-pocket for health insurance, then you can withdraw the equivalent funds from your IRA without being assessed the early withdrawal penalty.

The above rules can change from year to year. For example, in past years, the penalty exemption for medical expenses kicked in at 10% instead of 7.5%. If you're younger than 59 1/2, it's always a good idea to double-check that you qualify for an exception to the early withdrawal penalty before you deduct any money from your account.

What You Should Know About IRA Distributions in 2025

Avoid the early withdrawal penalty by knowing these rules.