Penalty-free IRA withdrawals through an annuity

For those who have an IRA (an individual retirement account) and are concerned about avoiding any 10% early withdrawal penalties (before age 59 1/2), there are a variety of exceptions to the penalties, including to pay for medical costs. For people with a Roth IRA, there are special rules, such as stated below from this article:

Withdraw from a Roth IRA. If you have a Roth IRA that is at least five years old, you may be able to withdraw your contributions, but not the earnings, without incurring an early withdrawal penalty.

However, the most intriguing method is the “annuity” method, which allows “a series of substantially equal payments” at least once a year (annually). That is what I will focus on here.


From what I can tell from reading section 2.01 (a) of, an example would be that a 36 year-old person could set up a withdrawal of about 1/60 of the total account balance without a penalty (if they are setting this up to be a regular annual distribution). For a married couple, the exemption would be basically doubled (with slight variables like how far apart the ages are of the couple).


First, for reference, here is the full list of exempt withdrawals:

Next, here is the text of the IRS publication concerning the exempt annuity withdrawals:

  You can receive distributions from your traditional IRA that are part of a series of substantially equal payments over your life (or your life expectancy), or over the lives (or the joint life expectancies) of you and your beneficiary, without having to pay the 10% additional tax, even if you receive such distributions before you are age 59½. You must use an IRS-approved distribution method and you must take at least one distribution annually for this exception to apply. The “required minimum distribution method,” when used for this purpose, results in the exact amount required to be distributed, not the minimum amount.

There are two other IRS-approved distribution methods that you can use. They are generally referred to as the “fixed amortization method” and the “fixed annuitization method.” These two methods are not discussed in this publication because they are more complex and generally require professional assistance. For information on these methods, see Revenue Ruling 2002-62, which is on page 710 of Internal Revenue Bulletin 2002-42 at

For further info, see pages 3-7 (#710 – 713) of the document in the last link.


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