You may dissolve an individual retirement account whenever you wish to do so, regardless of whether you have reached retirement age. Unlike an early distribution, dissolution of an IRA does not even require proof of financial hardship. If you do decide to dissolve the account before you meet the minimum requirements set by the IRS, however, you will have to pay a tax penalty on the cash value of your IRA.
Step 1
Contact your IRA manager and request an IRA distribution request form. Each investment company has its own procedure for dissolving an IRA, but they all require you to file a formal distribution request.
Step 2
Complete the personal information section of the IRA distribution request form. This information allows investment companies to verify your identity. You will need to provide your full name, address, account number, Social Security number, date of birth and telephone number.
Step 3
Specify in the form what type of distribution you need to dissolve your account. Dissolving your IRA before you turn 59 1/2 results in a premature distribution. Dissolution after you are 59 1/2 results in a normal distribution. You may also dissolve an account and take distribution of the funds if you have a permanent disability, or if you are the named beneficiary of an IRA.
Step 4
Request a one-time distribution of the account balance. The request form allows you to withdrawal regular installments, a one-off distribution or payment of the entire balance. If you want to dissolve the account, you must request payment of the entire account balance.
Step 5
Specify whether you want your IRA manager to withhold taxes for you. Tax rates may change from year to year. If you decide to request a withholding of your assets, ask your manager what percentage of your IRA you should set aside for federal and state taxes. As of 2012, the IRS requires a 10 percent withholding for federal taxes. If you live in certain states, such as Arkansas, Iowa, Oklahoma, Delaware and California, and you decide not to withhold federal taxes, you can opt to apply state tax withholding instead.
Step 6
Send a completed form to the address printed in the distribution form.
