Yes, you can withdraw from your IRA at any age if you’re disabled, and the 10% early withdrawal penalty that normally applies before 59½ is waived. You still owe ordinary income tax on money coming out of a Traditional, SEP, or SIMPLE IRA. And “disabled” here means the IRS’s definition, which is narrower than Social Security’s and requires medical documentation you keep in your own records.
What the IRS Means by Disabled
The definition comes from IRC Section 72(m)(7): you cannot engage in any substantial gainful activity because of a medically determinable physical or mental impairment that is expected to result in death or last indefinitely.1Office of the Law Revision Counsel. 26 U.S. Code 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts Every word carries weight.
“Any substantial gainful activity” means any job, not just the one you used to do. An electrician sidelined by a back injury who could theoretically hold a desk job may not qualify. The impairment has to be medically verifiable, not self-reported. And the duration test is strict: a condition expected to heal, or to improve enough for you to return to some kind of work, doesn’t count. The IRS is looking for permanent or near-permanent inability to work in any capacity.
The Medical Proof You Need to Keep
The statute requires you to furnish proof of your disability in the form and manner the Secretary requires.1Office of the Law Revision Counsel. 26 U.S. Code 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts In practice, get a written statement from a licensed physician that covers three points: what your impairment is, that it prevents you from performing any substantial gainful activity, and that it will result in death or continue indefinitely.
Back that statement with objective medical evidence: clinical findings, lab work, imaging, treatment records. A short doctor’s note without underlying records is thin. You don’t file any of this with your return. Keep it and be ready to produce it if the IRS asks. Getting the physician’s letter close to the date of your withdrawal keeps the timeline clean.
Does a Social Security Disability Award Satisfy the IRS?
Not automatically. SSA uses a five-step process that weighs age, education, and work history. The IRS test is narrower and focused on whether any substantial gainful activity is possible given the impairment itself. An SSA approval is persuasive, but the IRS can still reach a different conclusion. If you already have an award letter, ask your doctor to write documentation that specifically mirrors the IRS language — substantial gainful activity, indefinite duration, medically determinable impairment — rather than relying on the SSA finding alone.
What You’ll Owe on the Withdrawal
The disability exception waives the 10% penalty. It does not waive income tax.2Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions Every dollar coming out of a Traditional IRA is taxed as ordinary income at your marginal rate for the year, because those contributions were deductible going in. If you made nondeductible contributions along the way, part of any withdrawal represents already-taxed basis and comes out tax-free; Form 8606 handles that calculation, and the IRS applies a pro-rata rule across your total IRA balance.3Internal Revenue Service. Instructions for Form 8606
SEP and SIMPLE IRAs follow the same tax rules. One wrinkle: SIMPLE IRA distributions within the first two years of participation normally carry a 25% penalty rather than 10%. The disability exception still waives it, but the stakes of a mistake are higher during that window.2Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
Roth IRAs Work Differently
Roth withdrawals follow an ordering rule: contributions first, then conversions, then earnings. Your contributions were already taxed, so pulling them out is always tax- and penalty-free, disability or not.
Disability matters for the earnings portion. A Roth distribution is fully qualified — earnings included, entirely tax-free — only if you have a qualifying event and the account has met a five-year holding period.4Office of the Law Revision Counsel. 26 U.S. Code 408A – Roth IRAs Disability is a qualifying event, and the five-year clock starts January 1 of the tax year of your first Roth contribution. If you’ve hit five years and you’re disabled under the IRS standard, everything comes out tax-free. If you haven’t, contributions still come out tax-free, earnings are taxable as income, and the 10% penalty on those earnings is still waived by disability.
How to Claim the Exception on Your Return
Your custodian sends a Form 1099-R. Box 1 shows the gross distribution, Box 2a the taxable amount, Box 7 a distribution code. If the custodian knows the withdrawal was for disability, they should use code 3.5IRS. 2025 Instructions for Forms 1099-R and 5498
Even with code 3 on the 1099-R, you still need Form 5329 attached to your return. On Line 1, enter the taxable amount of the early distribution. On Line 2, enter the amount qualifying for the exception and write exception number 03 in the space provided.6Internal Revenue Service. 2025 Instructions for Form 5329 – Additional Taxes on Qualified Plans (Including IRAs) That form is what actually prevents the 10% additional tax from being assessed. Skip it and the IRS will see a pre-59½ distribution and bill you for the penalty automatically.2Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
Getting the Penalty Back if You Already Paid
If you took a disability-related withdrawal in a prior year and paid the 10% penalty without realizing an exception applied, you can recover it. If the only correction is the penalty itself, the IRS instructions direct you to file Form 843, Claim for Refund and Request for Abatement. If other items on the return also need fixing, file Form 1040-X with a corrected Form 5329 attached.7Internal Revenue Service. Instructions for Form 1040-X
The normal refund deadline is three years from filing the original return or two years from paying the tax, whichever is later.7Internal Revenue Service. Instructions for Form 1040-X Disabled taxpayers get extra room. If you were financially unable to manage your affairs because of your impairment, the statute of limitations is suspended for the whole period of that financial disability.8Office of the Law Revision Counsel. 26 U.S. Code 6511 – Limitations on Credit or Refund The impairment has to be expected to result in death or last at least 12 continuous months, and the suspension doesn’t apply during any period when a spouse or other authorized person was handling your finances. Someone who became disabled several years ago without anyone acting on their behalf may still have a live claim well outside the usual window.
If You Don’t Meet the IRS Disability Standard
Serious illness that doesn’t meet the total-and-permanent bar can still open other doors to penalty-free withdrawals. Unreimbursed medical expenses above 7.5% of your adjusted gross income qualify for their own exception, limited to the amount above that threshold. Health insurance premiums qualify if you’ve received unemployment compensation for at least 12 consecutive weeks.2Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
A separate terminal illness exception, added by SECURE 2.0 for withdrawals after December 29, 2022, waives the penalty if a physician certifies your condition is reasonably expected to result in death within 84 months.1Office of the Law Revision Counsel. 26 U.S. Code 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts That fills a real gap, since some terminal conditions leave a person able to work in the short term and therefore outside the disability definition. If the prognosis changes, the withdrawn amount can be recontributed within three years without counting against contribution limits. Income tax on Traditional IRA amounts still applies in every one of these cases.
How the Withdrawal Affects SSI or SSDI
SSI is means-tested. For 2026, an individual can have no more than $2,000 in countable resources, and unearned income above $1,014 per month can make you ineligible.9Social Security Administration. A Guide to Supplemental Security Income (SSI) for Groups and Organizations An IRA distribution counts as unearned income in the month you receive it, and any portion you haven’t spent by the following month becomes a countable resource. A single large withdrawal can breach both limits at once. Spreading distributions across months in smaller amounts is often the difference between keeping benefits and losing them, and a benefits counselor is worth the visit.
SSDI is different. Eligibility turns on your work history and whether you’re engaging in substantial gainful activity, which for 2026 means earning above $1,690 per month for non-blind individuals.10Social Security Administration. Substantial Gainful Activity Investment income and retirement distributions are not earned income, so an IRA withdrawal does not count toward the SGA threshold and won’t disturb your SSDI benefits.