Withdrawals from IRAs: When owner is under age 59 ½ MontGuide Marsha A. Goetting, MSU Kristen G. Juras, School of Law, University of Montana Revised 2003

Marsha A. Goetting MSU Extension Family Economics Specialist P. O. Box Montana State University Bozeman, MT

6 MontGuides 1.Individual Retirement Accounts 2.Shopping for an IRA 3.Withdrawals from IRAs  When owner is under 59 ½  When owner is between 59 ½ & 70 ½; turns 70 ½ 4.Inheriting an IRA: Planning techniques  Primary beneficiaries  Successor beneficiaries

Individual Retirement Accounts Search: Search:  Individual Retirement Accounts

IRA Tax Law Changes Economic Growth & Tax Relief Reconciliation Act of 2001Economic Growth & Tax Relief Reconciliation Act of 2001

Withdrawals General Rule General Rule  Subject to 10% penalty on amount withdrawn if owner is under age 59 ½

Withdrawals before 59 ½ Can be made w ithout 10% excise tax under certain circumstancesCan be made w ithout 10% excise tax under certain circumstances

1. Medical Expenses Qualified unreimbursed medical expenses greater than 7.5% of adjusted income. Qualified unreimbursed medical expenses greater than 7.5% of adjusted income.

2. Health Insurance Premiums by an unemployed person Premiums by an unemployed person  12 or more weeks

3. First-time home buyer expenses Qualified acquisition costs up to $10,000 Qualified acquisition costs up to $10,000

Principal residence IRA owner IRA owner His/her spouse His/her spouse Children Children Grandchildren Grandchildren Ancestors Ancestors

4. Qualified higher education expenses Tuition & Fees Tuition & Fees Textbooks Textbooks Supplies Supplies Computer Equipment Computer Equipment

4. If at least half-time student Qualified Expenses includeQualified Expenses include  Room  Board

4. Higher Education Qualified Users IRA owner IRA owner His/her spouse His/her spouse Children Children Grandchildren Grandchildren

5. Disability Withdrawal due to disability of account holder Withdrawal due to disability of account holder  No 10% penalty

6. Death Withdrawal due to death of account holderWithdrawal due to death of account holder  No 10% penalty

Owner Owner Owner & beneficiary Owner & beneficiary 7. Equal payments based on life expectancy

Question #8 What % of IRA owners made a withdrawal from a traditional IRA during 2002? What % of IRA owners made a withdrawal from a traditional IRA during 2002?

Answer: #8 % of owners making withdrawals from traditional IRA % of owners making withdrawals from traditional IRA  16%

Roth Withdrawals Tax-year 2002 Tax-year 2002  2%

Withdrawals from IRAs: When owner is under age 59 ½ For review refer to: MontGuide Revised 2003