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Getting Cash From Your IRA

You may be able to take money from your IRA, penalty-free.

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This story appears in the April 2006 issue of Entrepreneur. Subscribe »

Need a cash infusion, but don't want to pay the 10 percent penalty for making an IRA withdrawal before retirement age? Under the little-known IRS provision Code 72(t), you can take a penalty-free distribution for a variety of purposes, including disability, medical costs, the purchase of a first home, higher-education expenses, conversion to a Roth, and equal, periodic payments for income.

"For many IRA holders, it's a great way to access retirement dollars early," says Cathleen Davis, a consultant in Wachovia's IRA marketing department, who adds that distributions must comply with certain conditions. For example, penalty-free withdrawals for qualified first-time home buyers are limited to a total of $10,000, while medical expenses must be greater than 7.5 percent of the IRA holder's adjusted gross income.

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