If a person does not meet the disability requirement necessary for waiver of the ten percent (10%) early withdrawal penalty for taking funds out of an IRA or qualified plan before age 59 1/2, there are still several other exceptions to the early withdrawal penalty that may be useful for a person with a disability, even if his or her condition does not rise to a level where it completely prevents him or her from performing substantial gainful activity. If someone is unemployed and needs to take money out of a retirement plan to pay privately for health insurance (often very important for people with disabilities or for the parents of children with disabilities), the IRS will waive the early withdrawal penalty. Likewise, if an account owner has significant unreimbursed medical expenses that are more than seven and 1/2 percent (7.5%) of his or her gross income, then the retirement funds can be utilized to pay for those bills without penalty. While the disability, health insurance and medical expense exceptions to the early withdrawal penalty are probably the most pertinent for people with disabilities, there are several other exceptions, like an exception for higher education expenses, that may also meet a family’s needs.
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