The process of sending a check for an IRA withdrawal includes the time it takes to sell assets within the fund as well as settlement periods for selling stocks or bonds. You can shorten the time by setting up electronic transfers into another account instead of having a check sent, so it could take as little as a few days. Cashing out your IRA before age 59 1/2 brings a 10-percent federal tax penalty except in certain cases. No matter the circumstance, the money you receive becomes taxable income.
Check or Deposit
Each custodian of your IRA account, such as a bank or financial service, has different methods for sending you the withdrawn money. If you cash out using an account check, it typically takes five to seven business days. Electronic funds transfers into your personal account might only take one to three business days. If you transfer money into a non-retirement account with the same bank or financial service, it could take two business days or less.
Sending the check to your mailing address could take five to seven business days. You could have difficulty withdrawing the full amount if you changed your address within a certain period, usually 15 days. The service might only allow you to take $10,000 even if you have $50,000 in the IRA account. The bank or service requires the extra time for processing and confirming the new address to protect against possible fraud. You can avoid the wait if you have your own account for an electronic transfer.
According to the Fidelity website, IRS regulations require your custodian "to withhold federal income tax at the rate of 10% from your total withdrawal unless your withdrawal is from a Roth IRA," or unless you elect otherwise. In some cases you can change your tax withholding percentage or elect not to have federal tax withheld. For IRAs other than Roth, "your state income tax withholding requirements are determined by the state of residence indicated in your legal address on file" with your custodian, and "whether or not federal income tax is withheld," Fidelity says. You are ultimately responsible for all federal, state and local income taxes -- as well as estimated tax payments and penalties -- no matter how you elect a withholding percentage for your IRA withdrawal. If you withdraw money before age 59 1/12, you might be subject to a 10% early withdrawal penalty.
You usually wait the same amount of time for your check whether cashing out your IRA or taking distributions, so consider the amount and reasons you want to cash out early if you are under age 59 1/2. IRS regulations allow you penalty-free early withdrawals in certain cases, including covering qualified higher educational expenses, medical expenses that equal more than 7.5 percent of your adjusted gross income, up to $10,000 for a first-time home purchase, and costs for an unexpected disability. This early withdrawal penalty does not apply to withdrawals made after age 59 ½. Check with a tax professional or financial adviser on these options.
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