You can withdraw from a rollover IRA at any time, but three ages decide what it costs you: before 59½ the IRS adds a 10% early withdrawal penalty on top of ordinary income tax, at 59½ the penalty goes away and only income tax remains, and at 73 or 75 (depending on your birth year) withdrawals stop being optional and become required.
Withdrawals Before Age 59½
Money taken out of a traditional rollover IRA before you turn 59½ is treated two ways at once. First, the full amount counts as ordinary income for the year and is taxed at your regular rate. Second, the IRS tacks on an additional 10% tax on the distribution as an early withdrawal penalty.1Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
There’s no rule stopping you from taking the money. The account is yours and the custodian will process the request. But between federal income tax, the 10% penalty, and any state tax, a pre-59½ withdrawal often loses a third or more of its face value before it reaches you.
Situations That Waive the 10% Penalty
The IRS carved out a set of circumstances where the 10% penalty doesn’t apply. Ordinary income tax still applies in every case below; only the extra 10% surcharge disappears.1Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
Substantially Equal Periodic Payments
Sometimes called a 72(t) distribution, this lets you take a series of roughly equal payments based on your life expectancy. The payments must continue for at least five years or until you reach 59½, whichever comes later.2Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts If you modify the schedule before the required period ends, the IRS retroactively applies the 10% penalty to every distribution you already took.
First-Time Home Purchase
You can pull up to $10,000 over your lifetime to buy, build, or rebuild a first home.3Internal Revenue Service. Topic No. 557, Additional Tax on Early Distributions From Traditional and Roth IRAs A married couple with separate IRAs can each use their own $10,000 for a combined $20,000. “First-time” is broader than it sounds: you qualify if you haven’t owned a principal residence in the two years ending on the acquisition date. The funds must be used within 120 days of the withdrawal.
Higher Education Expenses
Qualified education costs at an eligible postsecondary institution for you, your spouse, your children, or your grandchildren are penalty-free. Tuition, fees, books, supplies, and room and board (for students enrolled at least half-time) all qualify. There’s no dollar cap, but withdrawals above the actual expenses paid that year get hit with the 10% penalty on the excess.
Unreimbursed Medical Expenses
If your out-of-pocket medical costs exceed 7.5% of your adjusted gross income, the portion above that threshold can come out penalty-free. On an $80,000 AGI with $10,000 in bills, the penalty-free amount is $4,000: what’s left after subtracting the $6,000 floor.
Disability or Terminal Illness
Total and permanent disability qualifies, but the IRS standard is strict: a physician must determine that a physical or mental condition prevents any substantial gainful activity and is expected to last indefinitely or result in death. SECURE 2.0 added a separate terminal illness exception when a licensed MD or DO certifies a condition reasonably expected to result in death within 84 months.
Birth or Adoption
Each parent can take up to $5,000 penalty-free within one year of a child’s birth or legal adoption. The limit is per individual across all retirement accounts. You can repay the amount to your IRA within three years.
Domestic Abuse
Starting in 2024, victims of domestic abuse by a spouse or domestic partner can withdraw the lesser of $10,000 (indexed for inflation) or 50% of the account balance without the 10% penalty. Self-certification is allowed, and the amount can be repaid within three years.
Withdrawals After Age 59½
At 59½ the 10% early withdrawal penalty ends. You can take any amount, for any reason, on any schedule. The account is yours to draw from freely.
Income tax doesn’t end, though. Every dollar out of a traditional rollover IRA is ordinary income for the year, stacked on top of Social Security benefits, wages, or anything else you earn. A large lump sum can push you into a higher bracket for that year alone, so spreading larger withdrawals across two or more tax years is a common way to soften the hit.
When Withdrawals Become Mandatory
Tax deferral on a rollover IRA has an expiration date. Federal law requires you to start taking required minimum distributions once you hit a set age, and SECURE 2.0 raised that age in two steps:
- Born 1951–1959: RMDs begin at 73. Your first distribution is due by April 1 of the year after you turn 73.
- Born 1960 or later: RMDs begin at 75, starting in 2033.4Office of the Law Revision Counsel. 26 USC 401 – Qualified Pension, Profit-Sharing, and Stock Bonus Plans
The annual amount is your account balance on December 31 of the prior year divided by a life expectancy factor from the IRS Uniform Lifetime Table. A 75-year-old uses a divisor of 24.6, so a $500,000 balance produces an RMD of roughly $20,325. The divisor shrinks each year, so the required percentage climbs as you age.
One timing trap: delaying your first RMD until April 1 of the following year (which is allowed only for the first year) means two RMDs land in that same calendar year, since the second year’s distribution is still due by December 31. That doubles up the taxable income.
Miss the deadline and the IRS charges a 25% excise tax on the shortfall. That drops to 10% if you fix the mistake within two years by withdrawing the missed amount and filing a corrected return.5Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs To request a waiver for reasonable cause, file Form 5329 with a written explanation of what happened and how you corrected it; the IRS can waive the tax entirely if the shortfall was a legitimate error.6Internal Revenue Service. 2025 Instructions for Form 5329 – Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts
How to Actually Take the Money Out
Start with the financial institution that holds your rollover IRA. Most custodians take distribution requests through an online portal. If they don’t, you’ll fill out a paper form that may need a notarized signature or, for larger amounts, a Medallion Signature Guarantee from a bank or brokerage.
As part of the request you complete IRS Form W-4R to choose federal income tax withholding for the distribution. Skip the election and the custodian withholds 10% by default; you can request anywhere from 0% to 100%.7Internal Revenue Service. 2026 Form W-4R Form W-4P is a separate form used only for periodic payments like scheduled monthly distributions. Some states require withholding on retirement distributions and others let you opt out, so check your state’s rule before you submit.
Funds usually arrive by ACH transfer, wire, or mailed check. After year-end the custodian sends you Form 1099-R showing the amount distributed, the taxable portion, and any tax withheld, which you use when filing your return.8Internal Revenue Service. Instructions for Forms 1099-R and 5498
If You’re Moving the Money, Not Spending It
A withdrawal you intend to move into another IRA or retirement plan is a rollover, and rollovers have their own trap. Once the money leaves your IRA, you have 60 days to deposit it into another qualifying account. Miss the window and the whole amount becomes a taxable distribution, with the 10% penalty on top if you’re under 59½.9Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
There’s a second limit most people don’t know about: you’re allowed only one indirect (60-day) rollover across all your IRAs in any 12-month period, and that ceiling aggregates every IRA you own, including SEP and SIMPLE accounts. A second indirect rollover within 12 months is taxable no matter how quickly you complete it.
The workaround is a direct trustee-to-trustee transfer. The funds move between custodians without passing through your hands, the 60-day clock never starts, and the once-per-year limit doesn’t apply. Unless you have a specific reason to take possession of the money, ask for a direct transfer.
State Taxes Are Separate
Federal income tax on a rollover IRA distribution is unavoidable, but the state bill varies widely. Some states have no income tax and don’t touch the distribution at all. Others tax IRA withdrawals fully as ordinary income. Several offer partial exclusions for retirement income once you reach a certain age, often 59½ or 65. Check your state’s current rules before pulling a large amount so you can time withdrawals against the combined federal and state cost.