What Happens When I Withdraw Money from a Traditional IRA?

Generally, the amount you withdraw is taxable as ordinary income. If you are younger than 59.5, you will be subject to an additional 10 percent penalty unless the money is needed to pay for:

Unreimbursed medical expenses that exceed 7.5 percent of adjusted gross income.

Health insurance if you have lost your job and meet certain other requirements.

Certain college expenses - such as tuition, fees and books -- for you, your spouse or children or grandchildren.

A "first" home. If you or your spouse has not owned a home for the past two years, you can take out $10,000 penalty free, but only once in your lifetime. Your spouse can also take out $10,000. You can also use this one-time withdrawal to help a child, grandchild or parent buy a first home.

You also can avoid the 10 percent penalty if a doctor has determined that you are physically or mentally incapable of working, if you are taking "substantially equal periodic payments" from your IRA or if you are taking distributions from an inherited IRA. For more on these exceptions see