Blog Series: How to Take Money Out of Your IRA Tax-Free!

Did you know there are several ways to take money out of your IRA tax-free? Unfortunately, many investors are not aware of these options. Obviously, just because you CAN doesn’t mean you SHOULD.

The first thing you should do is consult your tax/legal/financial advisor(s) and determine if taking money out of your IRA is the right step for you! There is often a penalty for taking out the funds earlier than 59 1/2 and unless you meet certain criteria this penalty cannot be avoided.  Even if you CAN avoid a penalty, it is prudent to go over your situation with an adivsor and determine if there are other options that might work better for you.

Over the next 7 days this blog will explore some of the possibilities of taking cash out of your IRA tax-free!

Option number 1: Roth IRA Conversions

Even if you don’t need money now, you may want to consider converting some or all of your IRAs to Roth IRAs.  When you do this, it isn’t tax free!!!  You will typically pay the taxes in the year the conversion is made.  However, since Roth IRA’s grow tax free and you’ve already paid income tax on the amount you contributed/converted, if you need to take a withdrawal in the future, the money you withdrawal is income tax-free!

Everyone’s situation is different so be sure to ask your advisor to do a Roth IRA conversion analysis to find out if this option makes sense in your situation as well as when and how much you should be converting!


Information gathered from MD Producer article for professionals