Traditional IRA Distribution Rules: Penalties, Taxes, and RMDs

The rules for traditional IRA distributions come down to three things: age, taxes, and timing. You can withdraw money at any age, but distributions taken before 59½ generally trigger a 10% additional tax on top of ordinary income tax. Once you reach 59½, only the income tax remains. And once you reach age 73 — or 75 if you were born in 1960 or later — the IRS requires you to start taking a minimum amount out each year, with a penalty of up to 25% for falling short.

Age 59½ Is the Line Between Penalty and No Penalty

You can pull money from a traditional IRA at any age for any reason. The IRS doesn’t require hardship or justification. But if you’re younger than 59½, the distribution triggers a 10% additional tax on top of the regular income tax you already owe, and that penalty applies to the taxable portion of whatever you withdraw, not just the gains.¹

At 59½, the penalty disappears. You can take as much or as little as you want, whenever you want, and owe only the regular income tax. Nothing forces you to start at 59½ either. The account can keep growing tax-deferred until required minimum distributions kick in, giving you roughly 13 to 15 years of optional, penalty-free access in between.

Exceptions That Waive the 10% Early Withdrawal Penalty

Several life circumstances let you skip the 10% penalty even before 59½. The withdrawal is still taxed as ordinary income in every case, but the extra hit goes away. The IRS recognizes the following exceptions for traditional IRAs:²

Distributions to a beneficiary after the account owner’s death.
Total and permanent disability that leaves you unable to work.
Unreimbursed medical expenses exceeding 7.5% of your adjusted gross income.
Up to $10,000 (lifetime) for a first-time home purchase.
Qualified higher education expenses for you, your spouse, children, or grandchildren.
Health insurance premiums while unemployed, if you received unemployment compensation for at least 12 weeks.
Up to $5,000 per child for qualified birth or adoption expenses.
Domestic abuse survivor distributions of up to the lesser of $10,000 or 50% of the account balance.
One emergency personal expense distribution per year of up to $1,000. Taking another within three years requires repaying the first or making equivalent new contributions.³
Up to $22,000 if you suffered an economic loss from a federally declared disaster where you live.²
A series of substantially equal periodic payments under Section 72(t).

The birth or adoption, emergency expense, and disaster exceptions were added or expanded by SECURE 2.0, so they’re relatively new. The emergency and disaster distributions also allow you to repay the money within three years and treat the distribution as if it never happened.

72(t) Substantially Equal Periodic Payments

If none of the specific exceptions fits, a series of substantially equal periodic payments under Section 72(t) lets you take regular withdrawals at any age without the 10% penalty. The commitment is what makes this hard: once you start, you must continue the payments for the longer of five years or until you reach age 59½.⁴ Start at 50, and you’re locked in for nine and a half years.

The IRS allows three calculation methods: required minimum distribution, fixed amortization, and fixed annuitization.⁴ The RMD method produces the smallest payments and recalculates each year; the other two produce larger fixed amounts.

Modifying the payment schedule before the required period ends triggers a retroactive recapture tax. The IRS goes back and charges the 10% penalty on every distribution you took, plus interest. A SEPP plan can work well for a predictable income gap — say, retiring at 55 and bridging to 59½ — but the math needs to be right the first time.

How Traditional IRA Distributions Are Taxed

Every dollar you withdraw from a traditional IRA generally counts as ordinary income on your federal return. Because you likely deducted contributions when you made them, the IRS collects its share on the way out, and both your original contributions and the growth they generated are taxable.¹

Your rate depends on your total taxable income for the year. For 2026, federal brackets for single filers start at 10% on income up to $12,400 and top out at 37% on income above $640,600. Married couples filing jointly reach the 37% bracket at $768,700.⁵ A large withdrawal can push you into a higher bracket, which is why many retirees spread distributions across multiple years rather than take a lump sum.

When Part of Your Distribution Is Tax-Free

If you ever contributed to your traditional IRA without taking a deduction — a nondeductible contribution — you’ve already paid tax on that money and don’t owe it again on the way out. The IRS tracks this on Form 8606 using a pro-rata formula: total nondeductible contributions divided by the total value of all your traditional IRAs.⁶ You can’t cherry-pick which dollars come out. If nondeductible contributions represent 20% of your total IRA balance, 20% of every withdrawal is tax-free and the rest is taxable.

File Form 8606 with your return for every year you take a distribution if you’ve ever made nondeductible contributions. Skip it and you risk paying tax on money that was already taxed once.

State Income Tax

State treatment varies. Nine states have no income tax, several fully exempt retirement income, others offer partial exclusions, and some tax IRA withdrawals the same way the federal government does. Where you live when you take the money is what determines which state’s rules apply, not where the IRA was opened.

Required Minimum Distributions Starting at Age 73 or 75

The IRS doesn’t let you defer taxes forever. Once you reach the RMD age, you must withdraw a minimum amount each year. Under SECURE 2.0, that age is 73 for anyone born between 1951 and 1959, and 75 for anyone born in 1960 or later.⁷

Your first RMD is due by April 1 of the year after you reach the applicable age. Every RMD after that is due by December 31.⁸ The April 1 grace period on the first RMD is a trap: delay into the following year and you’ll owe two RMDs in the same calendar year, both taxable as ordinary income.

Miss an RMD and the IRS imposes an excise tax of 25% on the amount you should have withdrawn. Catch the mistake and take the missed distribution within two years, and the penalty drops to 10%.⁸ Fixing it fast is always worth the trouble.

Calculating Your RMD

The math is straightforward. Take your total traditional IRA balance as of December 31 of the prior year and divide it by the life expectancy factor from the IRS Uniform Lifetime Table that matches your age.⁹ The table and worksheets are in IRS Publication 590-B.

A 73-year-old with a $500,000 balance at the end of the prior year would use a divisor of 26.5, producing an RMD of about $18,868.¹⁰ The divisor shrinks each year, so the required withdrawal percentage grows as you age.

One exception to the standard table: if your spouse is both the sole beneficiary and more than 10 years younger than you, you use the Joint Life and Last Survivor Expectancy Table instead, which yields a larger divisor and a smaller RMD.¹⁰ If you own multiple traditional IRAs, calculate each account’s RMD separately, then pull the total from any one account or any combination.

Rules for Inherited Traditional IRAs

When someone inherits a traditional IRA, the distribution rules depend on who the beneficiary is. The IRS sorts beneficiaries into categories, and the rules diverge sharply.

Surviving Spouses

A surviving spouse has the most flexibility. You can roll the inherited IRA into your own IRA and treat it as if it had always been yours, subject to the same RMD schedule and penalty rules based on your age. You can also keep it as an inherited IRA and take distributions over your life expectancy, or take a lump sum. Rolling it into your own IRA is usually the best move if you don’t need the money right away, because it keeps the account growing tax-deferred.

Non-Spouse Beneficiaries: The 10-Year Rule

Most non-spouse beneficiaries who inherited an IRA after 2019 must empty the account by the end of the 10th year following the year the original owner died.¹¹ There’s no annual minimum during those 10 years. You can take it all in year one, spread it evenly, or wait until year 10. Every dollar you withdraw is taxable income, so bunching it into a single year can create a painful bill. Spreading distributions typically makes more sense for bracket management.

Eligible Designated Beneficiaries

A narrow group can still stretch distributions over their own life expectancy rather than following the 10-year rule: surviving spouses (who usually roll over instead), minor children of the deceased owner (until they reach the age of majority, at which point the 10-year clock starts), disabled or chronically ill individuals, and beneficiaries who are not more than 10 years younger than the deceased owner.

The 60-Day Rollover Rule

If you take a distribution and want to undo the tax hit, you have 60 days to deposit the money into another IRA or back into the same one.¹² Miss that window by even a day and the entire amount becomes a taxable distribution, potentially with the 10% early withdrawal penalty on top if you’re under 59½.

There’s also a once-per-year limit. You can only do one indirect (60-day) rollover across all your IRAs in any 12-month period, and the IRS aggregates every IRA you own — traditional, Roth, SEP, and SIMPLE — for this limit.¹² Direct trustee-to-trustee transfers don’t count against this limit, which is why they’re almost always the safer route when you’re just moving money between IRAs.

Requesting a Distribution and Handling Withholding

Most custodians process distribution requests through their online portal. Decide the dollar amount, choose whether you want the funds sent electronically or by check, and have your bank routing and account numbers ready if you’re using direct deposit.

A one-time or on-demand IRA withdrawal counts as a nonperiodic payment. The correct withholding form is Form W-4R, not Form W-4P (which is only for recurring pension or annuity payments).¹³ If you don’t submit a W-4R, your custodian withholds 10% of the taxable amount by default.¹⁴

That default 10% is often not enough. If you’re in the 22% or 24% bracket, you’ll owe the difference at filing and may face an underpayment penalty. You can elect a higher rate on the W-4R to avoid the surprise.

In January or February of the following year, your custodian will send Form 1099-R reporting every distribution from the prior tax year.¹⁵ Box 7 carries a distribution code that tells the IRS how to classify the withdrawal: code 1 for an early distribution, code 7 for a normal distribution after 59½, code 4 for a death distribution to a beneficiary, and so on. Check that the code matches your situation before you file. An incorrect code can trigger IRS notices, and it’s much easier to have the custodian fix it than to explain it later.

1
Internal Revenue Service. Retirement Plans FAQs Regarding IRAs Distributions (Withdrawals)
2
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
3
Internal Revenue Service. Notice 2024-55 – Certain Exceptions to the 10 Percent Additional Tax Under Code Section 72(t)
4
Internal Revenue Service. Substantially Equal Periodic Payments
5
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
6
Internal Revenue Service. Form 8606
7
Congress.gov. Required Minimum Distribution (RMD) Rules for Original Owners
8
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
9
Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs)
10
Internal Revenue Service. Publication 590-B – Distributions From Individual Retirement Arrangements (IRAs)
11
Internal Revenue Service. Retirement Topics – Beneficiary
12
Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
13
Internal Revenue Service. About Form W-4R, Withholding Certificate for Nonperiodic Payments
14
Internal Revenue Service. 2026 Form W-4R
15
Internal Revenue Service. About Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.