May 7, 2008 4:30 pm US/Pacific
Taking Loans/Withdrawals From Retirement Accounts
Before Reaching Age of 59 1/2
(Courtesy: Gregg Wind, California Society of CPAs)
Generally, IRA distributions before age 59 ½ are subject to tax at regular rates PLUS a 10% "penalty tax." There are a few exceptions where the penalty tax would not apply, they are:
Withdrawals to pay insurance premiums if someone is unemployed
Withdrawals to pay for "qualified higher education expenses" for the IRA holder, spouse, child, grandchild or child of the IRA holder's spouse
Withdrawals to a first-time homebuyer, as long as the distribution is not in excess of $10,000
Withdrawals representing a return of a nondeductible contribution
Generally, withdrawals are different then loans, in that they are not paid back. In fact, loans from IRA accounts are generally prohibited but loans from a QUALIFIED pension plan (such are your DB plan) are permitted as long as they do not exceed $50,000 and as long as they are repaid, with a market rate of interest, within five years.
(California Society of CPAs)
