But an emergency situation or a financial planning consideration arises and you need access to that money now. There are ways to withdraw some of those funds and avoid the early withdrawal penalty. Becoming aware of these strategies and planning accordingly will help in averting this penalty. This penalty is intended to discourage early distributions and to encourage the use of the funds after retirement rather than before retirement. There are twelve exceptions to the penalty, but most provide limited planning opportunities.
Some exceptions are available only in the event of unemployment, disability or death.
Others apply only to certain limited situations, such as a first-time home purchase, college tuition or the payment of health insurance premiums during a period of unemployment. All of these requirements must be met in order to qualify for this exception. In addition, the IRS allows a variety of methods to determine the size of the fund. The IRA owner will want to work with a professional advisor, such as an accountant or actuary, or use pension distribution calculation software in order to determine the exact fund size that will meet the IRS requirements. Qualified pension plan participants may be permitted to take a partial distribution and roll that portion into an IRA in order to take advantage of this exception.