Waiver of Penalty from an IRA distribution

[Guest russo40]

What are the requirements of taking a distribution from an IRA without the 10% penalty. The example in question is a person that cannot work due to an auto accident and is 41 years old. What qualifies as disabled?

[Guest Tufan]

Defenition is; totally & permantly disabled and can not do any substantial gainful activity.

[Guest Paul Vickers]

To expand, disability is defined in section 72(m)(7) as "unable to engage in any substantial gainful activity by reason of a physical or mental impairment which can be expected to result in death or to be of long continues and indefinite duration".

In other words, not only must you be unable to do anything constructive now, but must be expected never to regain the ability.

If this exception is not available, the "substantially equal periodic payments" exception would be the only method left.

[Mary Kay Foss]

There is also an exception for medical expenses in excess of 7.5% of AGI. We've used this when one spouse is disabled and the other spouse takes IRA withdrawals in a year of large medical expenses.