You may withdraw money penalty-free before age 59½ for any of the following reasons:
- A first-home purchase, up to $10,000 (lifetime maximum)
- Qualified higher education expenses for yourself, a spouse, child or grandchild
- Contributions made with after-tax money
- Certain periodic payments, medical expenses and health insurance premiums
- If assessed with a levy by the IRS
- Upon disability or at death
Effective for distributions made after December 31, 2019, certain distributions related to the birth or adoption of a child are exempt from the 10% early withdrawal penalty.
- Qualified withdrawals are limited to $5000, in aggregate across an individual's accounts per birth or adoption
- The withdrawal must be made within one year after the birth or adoption date
- Subject to certain requirements including timing, these distributions may be repaid to a plan or IRA; though interested individuals should consider waiting for future IRS guidance that explain the exact timing rules for the repayment.
These exceptions are often referred to as 72(t) provisions because they fall under Internal Revenue Code Section 72(t).
All withdrawals are taxed as ordinary income.