Withdrawals/Distributions from an IRA

In general, all withdrawals from a regular, deductible IRA account are fully taxable and reported on Line 15b of Form 1040, or Line 11b of Line 1040A.

However, if you made any nondeductible contributions to IRAs over the years, a portion of your withdrawal will be treated as a withdrawal of the nontaxable cost basis of your IRAs, and no tax or penalties will apply to this portion.

You must compute the taxable and nontaxable portions of the withdrawals by completing IRS Form 8606, Nondeductible IRAs, and attaching it to your tax return. This can be a complicated process, so make sure that you follow the instructions to the form very closely.

• A 10 percent penalty applies to withdrawals considered premature, but there are a large number of exceptions that avoid the penalty.
• Withdrawals from Roth IRAs are subject to another set of rules.
• If taxable contributions were made to any of the IRAs, more complications exist.
• Mandatory withdrawals must be made after you turn 70-1/2.

Financial Calculators You may begin receiving money from your retirement accounts before you reach age 59-1/2, without the normal 10 percent penalty, if you meet certain exceptions for premature withdrawals. Use this 72(t) calculator to determine your allowable 72(t) Distribution and how it can help fund your early retirement. If you have a high rate of return, your account can actually grow, even with your distributions. On the other hand, if you suffer losses, your account balance may end up shrinking faster than you might expect. This 72(t) calculator is also designed to examine the affects of 72(t) distributions on your retirement plan balance.

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