Thumbs Up: Tapping IRAs Early

Physician's Money Digest, October31 2004, Volume 11, Issue 20

Conventional wisdom says you donot touch the money in your IRAuntil you retire. That's what it's for, andbesides, you get hit with income taxesplus a 10% penalty if you grab some ofthe cash before you reach age 59 1/2.But there are times when you can dipinto your IRA penalty free. If youhaven't owned a home in 2 years andyou're using the money to buy ahouse, there's no penalty. Ditto for collegeexpenses, although a 529 collegesavings plan is a better idea since themoney you take out of a 529 plan forcollege is tax-free as well as penalty free.And if you have medical expensesthat are more than 7.5% of youradjusted gross income, you can paythem out of your IRA without gettinghit with a penalty.