You can take money out of a rollover IRA whenever you want. Federal law sets no waiting period and no hardship test for withdrawing from a rollover IRA, but a traditional account will owe ordinary income tax on the distribution, and a 10% early withdrawal penalty usually applies if you are under 59½. Several exceptions can eliminate the penalty, and the request itself typically clears your custodian within a week.1Internal Revenue Service. Retirement Plans FAQs Regarding IRAs Distributions (Withdrawals)
How the Distribution Is Taxed
The money in a traditional rollover IRA has never been taxed. It went into your former employer’s 401(k) or similar plan pre-tax and kept growing tax-deferred after the rollover. When you take a distribution, the IRS treats the full amount as ordinary income for that year, and your total income determines which bracket applies.2Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts
Your custodian reports every distribution to the IRS on Form 1099-R, showing the gross amount and any federal tax withheld. You get a copy early the following year to use when you file.3Internal Revenue Service. Instructions for Forms 1099-R and 5498
The default federal withholding on an IRA distribution is 10% of the taxable amount. You can move it anywhere from 0% to 100% by submitting Form W-4R.4Internal Revenue Service. Form W-4R – Withholding Election for Nonperiodic Payments and Eligible Rollover Distributions If you elect little or no withholding, you cover the full bill at filing. Underwithholding across the year can also trigger an estimated-tax penalty.5Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty
Some states also tax IRA distributions as income; a handful exempt retirement withdrawals entirely. State withholding rules vary, so check with your state tax authority before requesting the money.
Watch for the Medicare Premium Effect
If you are on or near Medicare, a large withdrawal can push you into an Income-Related Monthly Adjustment Amount (IRMAA) surcharge two years later. For 2026, single filers with income above $109,000, or joint filers above $218,000, pay at least an extra $81.20 per month for Part B and $14.50 per month for Part D, with more at higher tiers.6Centers for Medicare & Medicaid Services. 2026 Medicare Parts A and B Premiums and Deductibles A $100,000 distribution taken in 2024 could bump your 2026 premiums into a higher bracket.
The 10% Early Withdrawal Penalty
Take money from a traditional rollover IRA before age 59½ and you owe a 10% additional tax on the taxable portion, on top of ordinary income tax.7Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts On a $50,000 early withdrawal, that is roughly $5,000 in penalty before income tax is calculated. You report and pay it on Form 5329, filed with your return for the year of the distribution.
Exceptions That Waive the Penalty
Federal law lists several situations where you can withdraw before 59½ without owing the 10%. The distribution is still taxed as ordinary income; you just avoid the extra charge. These are the exceptions that apply specifically to IRAs (some employer-plan exceptions do not carry over, and vice versa).8Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
- Substantially equal periodic payments (SEPP), a committed series of roughly equal annual withdrawals under one of three IRS-approved calculation methods. Payments must continue for at least five years or until you reach 59½, whichever comes later; break the schedule and you owe back penalties plus interest on every distribution in the series.9Internal Revenue Service. Notice 2022-6 – Substantially Equal Periodic Payments
- Higher education expenses for you, your spouse, or any child or grandchild of you or your spouse, covering tuition, fees, books, supplies, and room and board for at least half-time students at an eligible institution.
- Up to $10,000 over your lifetime for a first-time home purchase, build, or rebuild.
- Unreimbursed medical expenses that exceed 7.5% of your adjusted gross income for the year, up to the amount of that excess.
- Disability that prevents any substantial work and is expected to result in death or last indefinitely.
- Terminal illness certified by a physician as reasonably expected to result in death within 84 months. No dollar cap.
- Up to $5,000 per child for birth or finalized adoption expenses.
- Up to $10,000 (indexed for inflation) if you are a victim of domestic abuse by a spouse or domestic partner, taken within one year of the abuse.10Internal Revenue Service. Notice 2024-55 – Certain Exceptions to the 10 Percent Additional Tax
- Health insurance premiums while unemployed, if you received unemployment for at least 12 consecutive weeks.
- An IRS levy against your IRA to satisfy a tax debt.
Each exception has its own documentation. Keep tuition bills, medical invoices, physician certifications, adoption paperwork, or other proof in case the IRS asks you to substantiate the exemption.
If You Only Need the Money Temporarily
An indirect rollover lets you use IRA cash for up to 60 days and put it back with no tax and no penalty. You take a distribution, use the money, and redeposit the full amount into the same or another IRA before the 60-day clock runs out.11Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
Two catches. First, your custodian will withhold 10% for federal tax unless you elect out, and to roll over the full original amount you have to replace that withheld portion from your own pocket within the 60 days. Anything you fail to redeposit becomes a taxable distribution and can trigger the 10% penalty if you are under 59½.
Second, you are limited to one indirect IRA-to-IRA rollover in any 12-month period, and that limit applies across all your traditional and Roth IRAs combined, not per account. Direct trustee-to-trustee transfers do not count against the limit.2Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts
If Your Rollover Went Into a Roth IRA
Money you rolled from a Roth 401(k) or Roth 403(b) into a Roth IRA follows different rules. Contributions, which were already taxed on the way into the employer plan, can come out any time, tax-free and penalty-free, at any age. Roth IRA withdrawals are treated as coming from contributions first.
Earnings get the same tax-free treatment only if the distribution is qualified: you must be at least 59½ (or disabled, or using up to $10,000 for a first home) and at least five years must have passed since you first funded any Roth IRA. Earnings pulled out before both conditions are met are taxed as income and may face the 10% penalty.2Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts
Requesting the Money and How Long It Takes
Start with the distribution request form on your custodian’s website. You will need your account number and identifying information, and the form asks whether you want a full liquidation or a specific dollar amount. The key decision is federal tax withholding: the default is 10%, but you can set it anywhere from 0% to 100% with Form W-4R.4Internal Revenue Service. Form W-4R – Withholding Election for Nonperiodic Payments and Eligible Rollover Distributions If your combined federal and state rate will exceed 10%, raise the withholding so you are not caught short at filing. States that tax retirement income usually have their own withholding election on the same form.
Once the custodian verifies your request, they generally sell the necessary securities within one to two business days. After trades settle, delivery depends on the method:
- Electronic funds transfer to a linked bank account, usually three to five business days, typically no fee.
- Wire transfer, usually one business day, sometimes with a fee from the receiving bank.
- Paper check by mail, generally seven to ten business days.
If you have not yet linked a bank account, you will need to add one before choosing electronic delivery, and some custodians hold funds briefly after new banking details are added.
When Withdrawals Become Mandatory
You can wait, but not forever. A traditional rollover IRA is subject to required minimum distributions starting at age 73. Your first RMD is due by April 1 of the year after you turn 73; every RMD after that is due by December 31.12Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs) Miss one and the excise tax is 25% of what you should have taken out, dropping to 10% if you correct the shortfall within two years.13Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs Roth IRAs have no RMD during the owner’s lifetime.