It is often tempting to take money out of your retirement plan(s) to pay off bills, buy a new car, or to take a vacation. However you need to consider the tax penalties that you may incur when taking an early distribution from a qualified retirement plan, or a 403(b), a 401(k), or IRA program.

Early withdrawals or distributions that you receive prior to age 59 1/2 from these programs, are usually subject to a 10% penalty tax. The 10% penalty for a premature distribution is in addition to any regular income tax you pay resulting from including the distribution in your income.

There are exceptions to the early distribution tax. Distributions that you roll over to another qualified retirement plan are not subject to this 10% tax.

Exceptions that apply to either a qualified retirement plan or an IRA in regards to premature distributions are:

· Distributions due to total and permanent disability,

· those made to your beneficiary or estate on or after your death,

· made as part of a series of substantially equal periodic payments based upon your life expectancy or that of you and your beneficiaries, and

· distributions for deductible medical expenses that are more than 7.5% of your adjusted gross income.

· Distributions made to you after you have separated from service with your employer, if you separated from service in the year you reached age 55 (or were at an older age), and

· distributions made under a Qualified Domestic Relations Order (QDRO).

· Distributions made to pay for first time homebuyers, and

· distributions made to pay for qualified education expenses.