Will periodic payments on an early withdrawal from an IRA mean I can take the money without penalty?

Answer by  FinanceGuy (82)

An IRS rule of "substantially equal periodic payments" may allow you to take a withdrawal from your IRA without the 10% penalty. To qualify, these payments must be taken for the later of 5 years or until age 59 1/2.

Answer by  Kurt (4579)

No. These are regarded as two separate types of transactions. Payments reduce your taxable income and withdrawals increase it. The two transaction types do not offset.

Answer by  mlucas (515)

This is a tough question in which you will need to give us more detail. What is the purpose that you are removing money from your IRA? There are certain limited purposes that you can do this without penalty. Until such facts are known this question cannot be answered completely.

Answer by  tamarawilhite (17883)

If the periodic payments are still made before the allowable age, then no, it will not eliminate the penalty. If you take the money out before you are 59 1/2 or legally disabled, the penalty of ten percent in addition to the current income tax rate will apply to all distributions before you are 59 years six months old.

Answer by  Liz59 (10966)

Well, no it actually means you have to pay a fee of 10% for early withdrawals. I think you are assuming the exact opposite. There might just be a penalty.

Answer by  Liz59 (10966)

Yes, you got it right on the dot. Basically, if you do early withdrawals you can save yourself from the penalty. The penalty on the downside accounts for about 6% of the full transaction, which is good to be avoiding at the moment. Therefore, do the periodic payment scheme. It helps.

Answer by  daltonbob (52)

One situation that would allow this without penalty is if you are suffering from "hardship." The IRS does not strictly define "hardship" so it is really up to you and your CPA.