Can I Withdraw Money From My IRA If I'm Disabled?

IRA Distributions

Normal IRA distributions happen after age 59 1/2. Normal distributions from a traditional IRA are added to adjusted gross income. The Roth must be owned for at least five years before distributions are normal. Normal Roth distributions are non-taxable. Taking money out prior to qualifying for normal distributions has a 10 percent tax penalty assessed. If your disability qualifies, the 10 percent penalty is waived.

The 10 percent IRS early withdrawal penalty is waived for qualifying disabilities based on IRS definitions. The IRS exemptions require you to be permanently disabled and unable to perform activities that allow you to find gainful employment. Proof must be furnished by a physician stating that the disability is permanent, meaning there is no prognosis of recovery. Disability can be physical or mental.

If you are deemed permanently disabled, you can take distributions in any fashion you wish with all money taken out treated as a normal distribution. This means you can take regular, consistent distributions such as monthly income streams. Another option is to take periodic distributions as you need the money. You can also take a combination of regular distributions with additional periodic payments for unexpected financial needs. Provide the custodian with proof of your disability to properly record the distribution from the start.

Taking money out of a traditional IRA generates a 1099-R whether it is a normal or early distribution. Only early distributions from a Roth IRA generate a 1099-R with only earnings taxable since all contributions paid taxes prior being put in the account. A properly recorded distribution has Code "3" in Box 7, defining a disability distribution. Use the information on the 1099-R to complete your personal tax return, Form 1040. Taxable income is added to line 15. Further complete Form 5329 to record your disability exemption.