retirement savings medical expensesWhen you invest your money into retirement savings you should make every effort possible to not touch your funds until retirement age. IRAs and similar accounts typically come with penalty fees if you withdraw funds before age 59½. Of course, life can throw unexpected curve balls your way.

If you find yourself with mounting medical expenses, you may be able to withdraw funds from your retirement savings early and without penalty.

Withdrawing Funds From Retirement Savings To Pay For Medical Expenses
If you have a stack of medical bills you can’t pay, you may be eligible to withdraw money from your retirement savings to help pay the bills — penalty free. In order to be eligible you must meet the following criteria:

  • You must have medical bill expenses not covered by insurance or reimbursable in any way.
  • You can only withdraw penalty free the amount of your total medical bill that exceed 7.5 percent of your adjusted gross income for the year. For example, if your adjusted gross income is $50,000 for the year and your medical expenses total $5,000 you would be eligible to withdraw just $1250 penalty free.

It’s important to note you can withdraw any amount of funds to cover medical bills. However, if the amount you withdraw does not meet the above listed criteria, you will need to pay a 10 percent early withdrawal penalty fee, as well as state and federal taxes on the funds withdrawn.

Withdrawing Funds From Retirement Savings To Pay For Medical Insurance Premiums
If you find yourself struggling to afford high health insurance premiums, you may also be able to make withdrawals from your retirement savings, penalty free, to cover your premiums. In order to qualify for penalty free withdrawals you must meet the following criteria:

  • You must be unemployed for a time period of at least 12 weeks before you can withdraw funds.
  • You must withdraw the money and use it to pay premiums only during the time frame you are unemployed. You can no longer withdraw funds to cover premiums once you have found employment and have remained employed for a time period of sixty days.

Again, you may make additional withdrawals to cover medical premiums that do not qualify, but you will be assessed state and federal tax and be subject to a 10 percent early withdrawal penalty fee.

Withdrawing Funds For A Permanent Disability
A permanent disability may qualify for early withdrawal without penalty. To qualify you must meet the following criteria:

  • The disability can be either physical or mental.
  • The disability must be classified as permanent, meaning you are indefinitely disabled with no chance of recovery. If your disability is considered temporary you will not qualify.
  • You must also be unable to seek gainful employment due to the disability.

Again, if you do not qualify for penalty free withdrawals you can opt to pay the penalty fees if you do need to withdraw the money before you turn 59½.

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Jeff Rose is an Illinois Certified Financial Planner. He blogs at Good Financial Cents and Soldier of Finance. He loves Crossfit workouts, writes about Roth IRA rules and craves In-N-Out burger. You can follow his updates on Twitter.