Early IRA Withdrawals: Considerations For Those With Disabilities

Many companies are replacing traditional pensions with IRAs, 401(k)s, and similar retirement plans, allowing employees to save money tax-free until retirement. However, withdrawing funds early—before age 59½—results in both income taxes and a 10% penalty.

This penalty encourages long-term savings but can be a burden for those who become disabled and need financial support. To address this, the IRS allows individuals with disabilities to withdraw funds without the 10% penalty. To qualify, they must prove they are unable to work and that their condition is long-term or life-threatening.

This exemption follows similar rules to Social Security Disability Insurance (SSDI). Even if the penalty is waived, the withdrawn amount is still taxable income.

Read more about other exceptions and information for recipients of Supplemental Security Income.