You can take distributions from your IRA (including your SEP IRA or SIMPLE IRA) anytime. To accept a payout, you don’t have to prove any difficulties. Regardless of your age, you can withdraw your own contributions to your Roth IRA at any time without penalty. This rule does not apply to income that results from these contributions.
One of the riskier ways to access IRA funds temporarily without taxes or penalties — if you really need the money — is to try a 60-day IRA rollover. This IRS rule allows you to withdraw money from your traditional IRA and use it for any reason, as long as you repay the full amount before 60 days. You are allowed to do this once per 12-month period. Retirement plan participants and IRA owners, including owners of SEP IRAs and SIMPLE IRAs, are responsible for withdrawing the right amount of RMDs from their accounts on time each year, and they can expect heavy penalties if they don’t take RMDs.
So how much do you need to withdraw from your IRA? The minimum withdrawal rules for the IRA are based on life expectancy. Each traditional IRA that you convert to a Roth IRA has its own five-year holding period to avoid a penalty for early withdrawals. The Roth IRA rules state that five years must have passed since the tax year of your first Roth IRA contribution before you can withdraw the income in the account tax-free. The RMD rules also apply to traditional IRAs and IRA-based plans, such as SEPs, SARSEPs, and SIMPLE IRAs.
An IRA owner must calculate the RMD separately for each IRA they own, but can withdraw the total amount from one or more IRAs. While traditional IRA withdrawal rules allow you to defer your first required minimum payout from your IRA until April 1 of next year, you may want to make your first withdrawal in the first year you’re eligible. If you convert a traditional IRA to a Roth IRA, you’ll have to pay taxes when you switch over, but then you’ll never have to worry about paying taxes on that IRA again for qualified withdrawals, even if future tax rates are higher.
