Detailed question about IRA withdrawl taxation

[SecondAttempt]

I am generally pertty familiar with IRA withdrawal rules. My understanding is that withdrawals before age 59.5 get a 10% penalty but after 59.5 one just pays ordinary income tax rates.

But is the rule applied on a daily/monthly basis or by year? For example, let's say will turn 59 in February 2027. Since I will be over 59.5 by the end of 2027, does that mean any withdrawals reported on my April 2028 tax return for tax year 2027 are not subject to the penalty even if I made them in January 2027? Usually most things for a tax year are grouped by year but I have never been clear about this detail.

In practice this will probably be moot for me since I plan to retire a few days before my 59th birthday and live off of taxable accounts for two-three years at least before ouching my IRA.

I'm just trying to educate myself on last minue details.

 

[RobbieB]

Yes. Just make sure you are 59.5 before the draw.

 

[Perryinva]

It doesn’t matter to me any more, but IIRC, it is your actual age when you make the withdrawal. Not your age at the end of the year

 

[finnski1]

It doesn’t matter to me any more, but IIRC, it is your actual age when you make the withdrawal. Not your age at the end of the year

That's my understanding as well. So in the OP's scenario it would be an issue subject to the 10% early withdrawal penalty. Got to go by your age not tax year at time of withdrawal.

 

[Andre1969]

I was a bit confused about this as well, because sometimes I've heard it worded as "The year you turn 59 1/2." I hit 59 in April of 2029, and 59.5 in October. So going by that definition, any time in 2029 *should* be fair game.

However, I googled it out of curiosity, and this is the first thing that popped up...

"You can avoid the early withdrawal penalty by waiting until at least age 59 1/2 to start taking distributions from your IRA. Once you turn age 59 1/2, you can withdraw any amount from your IRA without having to pay the 10% penalty. However, regular income tax will still be due on each IRA withdrawal."

So, as others have said, looks like you need to wait until you actually reach 59.5, to start making withdrawals if you want to avoid that penalty.

 

[SecondAttempt]

Thanks everyone. Google gives so many answers written by journalists that it does not seem like a good source for precise details in this case. I will probably have to ask my enrolled agent in the spring.

 

[ocean view]

IRS publication 509-B has your answer. You will be subject to the penalty for withdrawals before age 59.5 except in a handful of very specific exceptions, like you have excessive medical expenses, college expenses, you are buying your first home and a few others.

https://www.irs.gov/publications/p590b