If you have a Traditional IRA account or you’re planning to open one, understanding how withdrawals work is just as important as knowing how contributions work. This year, the IRS has kept several key rules in place, with a few updated thresholds that might affect your retirement planning and tax strategy.
Whether you’re approaching retirement age or still in the saving phase, knowing the rules around traditional IRA withdrawals may help you avoid unnecessary penalties, stay compliant, and prepare for your financial future on your terms.
This guide breaks down the withdrawal rules, age requirements, penalty exceptions, and tax implications to help you navigate the process clearly.
What is a traditional IRA?
A Traditional IRA (Individual Retirement Account) is a tax-advantaged retirement account that allows individuals to save for retirement. Contributions may be tax-deductible, depending on your income and whether you have a retirement plan at work.
The investments grow tax-deferred, meaning you don’t pay taxes on earnings until you withdraw them. Unlike Roth IRAs, withdrawals from a Traditional IRA are taxed as ordinary income.
Traditional IRA contributions are made from your after-tax paycheck—not directly from pre-tax income (like 401(k) contributions).
Traditional IRA withdrawal rules 2025
It’s important to understand traditional IRA (individual retirement account) withdrawal rules when you’re planning for retirement because they depend on your age and life circumstances.
1. Age under 59½: Early withdrawal rules
If you take money out of your Traditional IRA before reaching age 59½, the IRS typically applies a 10% additional tax (penalty) on early withdrawals —on top of regular income taxes. However, certain situations may qualify for an exception to that penalty.
Exceptions to the 10% early withdrawal penalty include:
- Qualified higher education expenses, such as tuition, fees, and required books
- First-time home purchase, up to a lifetime limit of $10,000
- Unreimbursed medical expenses that exceed 7.5% of your adjusted gross income (AGI)
- Disability of the account holder
- Death of the account holder
- Substantially Equal Periodic Payments (SEPP), a long-term withdrawal strategy based on IRS-approved methods tied to life expectancy.
- IRS Levies: Withdrawals to pay tax debts directly levied by the IRS
- Health Insurance Premiums: If unemployed for at least 12 consecutive weeks
- Birth/adoption: New parents can take $5,000 from their IRA to pay for birth or adoption expenses without paying a penalty.
These exceptions may offer a way to access your IRA savings in specific circumstances without facing the early withdrawal penalty, though income taxes generally still apply.
Note: SEPP must last at least 5 years or until age 59½, whichever is longer, or the 10% penalty may apply retroactively.
Let us consider an example below for early withdrawal.
Situation:
You’re 45 years old and decide to withdraw $8,000 from your Traditional IRA to help cover medical bills.
What might happen:
Since you’re under 59½, the IRS may treat this as an early withdrawal and apply a 10% penalty. But if your unreimbursed medical expenses are over 7.5% of your AGI, you might qualify for an exception and avoid the penalty on that portion. For example, with a $50,000 AGI and $5,000 in medical costs, only the amount above $3,750 may be penalty-free.
2. Withdrawing after age 59½ but before RMD age
Between ages 59½ and your RMD start age (73), you can withdraw from your Traditional IRA without penalty. However, those withdrawals are still taxed as ordinary income.
This window is sometimes used to strategically manage taxable income or reduce future RMDs—but again, that may depend on your specific financial goals and situation.
3. Age 73 (or 75 if born in 1960 or later): Required minimum distributions (RMDs)
Once you reach age 73, you must begin taking Required Minimum Distributions (RMDs) from your Traditional IRA. This rule ensures that the government eventually collects taxes on the funds that have grown tax-deferred over the years.
Deadline for first RMD: You must take your first RMD by April 1 of the year after you turn 73. Subsequent RMDs must be taken by December 31 each year.
Calculation of RMDs: The amount is calculated by dividing your account balance at the end of the previous year by a life expectancy factor provided by the IRS.
For example, if your account balance is $100,000 and your life expectancy factor is 25.6, your RMD would be $3,906.25.
Penalties for missing an RMD: If you fail to withdraw your RMD, you face a 25% excise tax on the amount not withdrawn. If corrected within two years, this penalty reduces to 10%.
Let us consider the scenario of missing an RMD at age 73
Situation:
You turned 73 in March 2025 and have a traditional IRA with a balance of $250,000 as of December 31, 2024. You forget to take your Required Minimum Distribution (RMD) by December 31, 2025.
What might happen:
The IRS requires you to start RMDs at age 73. If you miss the deadline, the amount you didn’t withdraw might be subject to a 25% penalty. If you correct it promptly and file Form 5329 with a valid reason, the penalty might be reduced to 10%. For example, if your RMD was $9,400 and you missed it, you might owe $2,350 — or $940 if fixed in time.
Summary table: Withdrawal rules at a glance (2025)
Inherited traditional IRAs: Withdrawal rules for beneficiaries
If you inherit a Traditional IRA, the withdrawal rules depend on your relationship to the original account holder and when they passed away.
The 10-year rule, introduced by the SECURE Act and still in effect for 2025, typically applies to non-spouse beneficiaries. Under this rule:
- You must fully distribute the inherited IRA within 10 years of the original owner’s death.
- If the original IRA owner had already begun RMDs before passing, non-spouse beneficiaries may also need to take annual RMDs during the 10-year period, though the IRS has delayed enforcing this rule through 2024.
Spouse beneficiaries:
If you’re a spouse, you can:
- Treat the IRA as your own (roll it into your own IRA), or
- Delay RMDs until the year the original owner would have turned 73.
Are traditional IRA withdrawals taxable?
Withdrawals from a Traditional IRA are taxed as ordinary income. That means the amount you withdraw gets added to your total taxable income for the year.
Example:
If you withdraw $20,000 from your Traditional IRA in 2025 and fall in the 22% federal income tax bracket, you may owe $4,400 in federal income tax.
State taxes may also apply depending on where you live. Some states don’t tax retirement income, while others do.
Conclusion
Understanding the withdrawal rules for your Traditional IRA can help you avoid unnecessary taxes and penalties, which may ensure your retirement savings work as intended. Staying informed and planning ahead may help you make the most of your retirement assets.
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