[harshipsandy]

Can you tell me what are the reasons that you can claim hardship on an IRA or ROTH IRA? I have been unemployed for over a year and need to cashing some of my IRA to just pay bills and live. Are there penalties and taxes that need to be paid on this money?

Thanks,

[ebaines]

For withdrawals from a traditional IRA you will owe a 10% early withdrawal penalty for distributions if you are under 59-1/2 unless you meet an exception:

•You have unreimbursed medical expenses that are more than 7.5% of your adjusted gross income.
•The distributions are not more than the cost of your medical insurance.
•You are disabled.
•You are the beneficiary of a deceased IRA owner.
•You are receiving distributions in the form of an annuity.
•The distributions are not more than your qualified higher education expenses.
•You use the distributions to buy, build, or rebuild a first home.
•The distribution is due to an IRS levy of the qualified plan.
•The distribution is a qualified reservist distribution.

In addition to the early withdrawal penalty, for a traditional IRA you will also owe ordinary income tax on the portion of the withdrawal due to deductible contributions and earnings.

For a Roth IRA - if you withdraw money that has been in the account less than 5 years it is considered an early withdrawal, and you will owe the 10% early withdrawal penalty unless you meet one of the exceptions described above. You will also owe income tax on the portion of the withdrawal due to earnings if the money has been in the account less than 5 years. If the money has been in your Roth IRA more than 5 years, you have no income tax or penalty due.