Q. I took money out of my IRA to pay medical bills and other expenses. I’m 57. Will I have to pay a penalty and taxes for the early withdrawal?
A. You will have to pay taxes on the amount you withdrew. But you can avoid the 10 percent penalty for early withdrawals, which applies to people younger than 59 1/2, if the funds that you used to pay unreimbursed medical expenses exceeded 7.5 percent of the adjusted gross income (AGI) reported on your tax return.
For example, if your income was $30,000, only the first $2,250—7.5 percent of your AGI—of the IRA withdrawal that you used for medical expenses is subject to the penalty.
Other situations that allow for penalty-free early withdrawals:
• Buying a home for the first time.
• Paying for higher education for yourself or an immediate family member.
• Paying for health insurance if you’ve been unemployed for a certain period of time.
Carole Fleck is a senior editor at AARP Bulletin Today.