In another column on required IRA withdrawals, I looked at the tax rules that require the elderly to start drawing on the moneys in their individual retirement accounts (IRAs). Under those rules, there are stiff penalties if you fail to make withdrawals from your IRAs after you reach age 70 . In this article, we'll take a look at the other side of the coin. That is, "How soon can I get my IRA money?"

You may begin to withdraw money from your IRA without the 10% penalty after reaching age 59 . Assuming all of your IRA contributions were fully deductible ones, the amounts withdrawn after age 59 will be included in your taxable income just like wages. Therefore, if you don't need the money, withdrawing funds from your IRA may cause unnecessary taxation.

After age 59 and before age 70 , there are no requirements concerning the size or timing of your IRA withdrawals. During this age range, you may opt at any time to take as much or as little as you wish. Of course, if you have your funds invested in a vehicle that imposes a penalty for early withdrawals or redemptions, you may face those penalties. But these penalties have nothing to do with the ones levied by the IRS. Because there are no withdrawal requirements between the ages of 59 and 70 , those in this age group have the ability to time their distributions to maximize tax savings.

Prior to age 59 , most withdrawals will be subject to a 10% IRS penalty. This penalty is in addition to the regular tax you will pay due to the withdrawal being included in your income. There are, however, a few exceptions to this so-called premature distribution penalty.

One exception deals with distributions because of death or a qualifying disability. Under either of these circumstances, the penalty doesn't apply. Two more exceptions have just been added that apply starting January 1, 1997. The first permits penalty-free withdrawals that are used to pay medical expenses in excess of 7.5% of your adjusted gross income and the second allows unemployed persons to access IRA moneys without penalty if used to pay premiums for health insurance for themselves or their families. For years after 1997, you can also tap the IRA penalty-free if the money is used to pay qualified higher education expenses or to pay up to $10,000 of qualified acquisition costs for a principal residence of a first-time homebuyer. These exceptions are hardly ones you will want to count on as ways of tapping your IRA before age 59 . However, there is one beneficial way to tap your IRA before age 59 without penalty and its called the "substantially equal periodic exception".

The "substantially equal periodic payment exception" says that if you receive IRA payments at least annually based on your life expectancy (or the joint life expectancies of you and your beneficiary), then the withdrawals are not subject to the 10% penalty. The IRS has tables for determining the appropriate amount of each payment at any given age. While many are touting this exception as a way of reaching your IRA early, you should be aware that it is difficult to change your payment scheme without triggering a recapture penalty, plus interest. For example, if you start a qualifying early payment plan at age 50, but at age 57 you change to a plan that doesn't qualify, you'll be liable for the 10% penalty on all of the distributions you received, plus interest.

Even if you change the payment plan after age 59 , you may trigger the penalty because the payments must last for at least five years. For example, if qualifying payments start at age 56, they must last until age 61 to avoid the penalty. In this case, however, the penalty plus interest would apply only to the pre-59 withdrawals. As you can see, winding your way through these rules is like walking through a minefield. There are many traps for the unwary. Just remember the basic rules. Before age 59 , withdrawals are penalized; after age 59 and before age 70 , there are no penalties; and after age 70 , there are stiff penalties for failing to withdraw the minimum.

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