Do you want access to money from your retirement accounts but aren't sure of the real costs involved?

Most retirement accounts have a set age requirement you must reach before making penalty-free income distributions, which is usually 59.5 but can sometimes be as early as age 50. If you decide to access your accounts earlier, you could face penalties ranging from 10%-25%, which is not even considering the income taxes you will also owe.

Follow these five easy steps to avoid the 10% Penalty:

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1.Check the age of the IRA owner; look for an exception to the penalty.

The main exceptions are disability, death, medical expenses, fire-time homebuyers, higher education expenses, an IRS levy and health insurance for the unemployed.

2.Make sure the exception you want to use applies to the type of plan you have.

Some exceptions apply to both IRAs and employer plans (such as 401k plans), some apply to IRAs only and some apply to employer plans only.

3.The expense must be in the same year as the IRA distribution.

Make sure the IRA distribution is made in the same year the expense is incurred.

4.Some exceptions apply when the distribution is used for a family member.

Exceptions such as death and disability apply solely to the account owner, while other exceptions apply to family members, including spouses, children or grandchildren.

5.How to claim an exception.

You should file IRS Form 5329 with your tax return to tell the IRS what exception you are claiming.

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