2024 Net Worth Calculator by Age Table with Examples

When it comes to your money, the more you know, the better equipped you are to make informed financial decisions. One piece of your overall financial picture that you may want to understand is how much you’re “worth.” This information can help you understand where you are with your finances now and what you need to do to reach your goals for the future.

Before we look at a net worth growth calculator table that shows you how you compare against other people your age, let’s dive a bit deeper into what net worth is and why it’s important.

Key Points

•   A net worth calculator helps determine your financial health by calculating your assets and liabilities.

•   It provides insights into your overall financial picture and helps track progress over time.

•   Factors such as age, income, and debt impact your net worth.

•   Regularly updating and reviewing your net worth can help with financial planning and goal setting.

•   Use the calculator to assess your financial situation and make informed decisions about saving and investing.

What Is Net Worth?

You may hear this term being batted around in conversations surrounding billionaires, but in reality, everyone has a net worth. It’s simply a total of all your assets minus any debts you have.

Those assets can include cash, real estate, intellectual property, and other items like jewelry, stocks, insurance policies, and bonds. The cash may come from a job you have or from unearned income, such as your Social Security payment

Having a lot of assets does not necessarily mean you have a high net worth, particularly if you also carry a lot of debt. For example, you may have a million-dollar mansion, but if you have debts of $500,000, your net worth dwindles rapidly.

💡 Quick Tip: When you have questions about what you can and can’t afford, a spending tracker app can show you the answer. With no guilt trip or hourly fee.

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How Does a Net Worth Calculator Work?

There are many personal net worth calculators available online, though you don’t need one to calculate your net worth. Just take the total amount of all your assets and subtract the total amount of your liabilities:

Assets – liabilities = net worth

Some calculators will also factor in future growth so you can understand what your net worth will be in the future, as the value of your assets grows.

Recommended: What Is Disposable Income?

How to Calculate for Net Worth

As you can see, it’s fairly easy to calculate your net worth, though it may take time to gather the values of all your assets, such as the current value of a piece of high-end jewelry. But once you do, you can add up all your assets and then subtract your liabilities to calculate your net worth.

What Is the Average American Net Worth?

Knowing your own net worth is one thing, but where does it stand against other people in your age bracket? Generally, people see an increase in their net worth the older they get, and it can be helpful to use a net worth percentile calculator by age to see your percentile rank.

For example, if your net worth was $100,000, you would be in the 46.92 percentile for people between the ages of 18 to 100. The median net worth for this age bracket is $121,760.

Here’s the average net worth by different age groups, according to the most recent data available from the Federal Reserve.

Age Average Net Worth
18-24 $112,104
25-29 $120,183
30-34 $258,075
35-39 $501,295
40-44 $590,710
45-49 $781,936
50-54 $1,132,497
55-59 $1,441,987
60-64 $1,675,294
65-69 $1,836,884
70-74 $1,714,085
75-79 $1,629,275
80+ $1,611,984

Source: Federal Reserve’s 2022 Survey of Consumer Finances

Why Is Net Worth Important?

Calculating your net worth is smart because it can help you understand where you’re strong financially (maybe you have little debt) and where you’re weak (maybe you’ve overextended your credit to buy your home).

It may also help you make plans for the future. For example, if your net worth is high, you might explore strategies for reducing taxable income, such as contributing more to a tax-deductible retirement account. And if your net worth isn’t where you’d like it, you can take steps to improve it.

💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.

How to Increase Your Net Worth

If you’ve used a liquid net worth calculator, or compared your net worth to the table above and don’t feel like your numbers are as high as you’d like them to be, you can do a few things to increase your net worth.

If your debt levels are high, you can increase your net worth by decreasing that debt. Get a plan for paying off credit cards, student loans, car loans, and home mortgages. Consider increasing the amount you pay on each slightly to shorten your repayment period and decrease the amount of interest you pay on these loans and credit cards.

Creating a budget is one way to keep tabs on your finances as you’re paying off debt. A money tracker app can help make the job easier.

If you don’t have an abnormally high amount of debt but want to increase your assets, you might explore making more money. If you’re still in the workforce and have the ability to make a career change, you might consider cultivating potential high-income skills that could help you command a higher salary.

If you’re retired, you could take on part-time flexible work.

Recommended: How to Negotiate Your Signing Bonus

Examples of Celebrity Net Worths

Not that you need to compare yourself to celebrities when it comes to net worth, but it can be fun to see how the other half lives. Keep in mind that while A-list celebrities often command millions of dollars for their work, they’re usually also smart with their money. They don’t typically blow their money on sports cars and mansions (though certainly some do). Many are financially responsible, investing in multiple income streams and spending responsibly.

Let’s look at the net worth of a few celebrities.

Reese Witherspoon

Reese Witherspoon didn’t limit her career to acting. She also founded a lifestyle brand called Draper James and a media brand called Hello Sunshine. Today her net worth is about $300 million.

J.K. Rowling

The well-known author of the Harry Potter books has an estimated net worth of $1 billion, and she’s the first author in history to reach this height. Before she was published, however, she struggled financially, which makes hers a true rags-to-riches story.

Jay-Z and Beyoncé

Superstar artists Jay-Z and Beyoncé reign supreme when it comes to net worth. Thanks to touring, albums, clothing lines, movies, endorsements, merchandise, and more, the couple’s combined net worth is $3 billion.

The Takeaway

You may not be able to match the likes of Jay-Z and Beyoncé when it comes to net worth, but knowing yours can help you make smart financial decisions for the future. To figure out your net worth, you can subtract the total amount of your liabilities from the total amount of your assets. You can also use a personal net worth calculator; some will even factor in future growth.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

How do I calculate your net worth?

Net worth can be calculated by subtracting all your liabilities from your assets. In other words, subtract everything you owe (debts, loans, credit card debts) from everything you have (cash, property, real estate, jewelry, stocks).

What is a good net worth by age?

A “good” net worth depends on your financial goals and age. For example, the average net worth for 40-44 year-olds is $590,710. Yours may be higher or lower than this.

What net worth is considered rich?

According to a 2023 survey conducted by Charles Schwab, Americans need an average net worth of at least $2.2 million to feel wealthy. However, that amount varies based on where you live.

Photo credit: iStock/Kanatip Chulsomlee


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Options for When You Can’t Afford Your Child’s College

These days, college is a pricey proposition. The average annual cost of attendance for a student living on campus at a public four-year college is $26,027 (in state) and $27,091 (out of state). The average cost of attending a private, nonprofit university is $55,840 per year.

If you’re worried about how you’ll cover the cost of sending your child to college, know that you’re not alone. Also know that you (and your student) have a number of funding options, including grants, scholarships, work-study, and student loans. Read on for tips on how to pay for college when your savings isn’t enough.

Steps to Take if You Can’t Afford College

Here’s a look at five things you can do to make sending your child to college more affordable.

Complete the FAFSA

The first thing every college-bound student is encouraged to do is fill out the Free Application for Federal Student Aid (FAFSA®). This automatically gives your student access to several types of financial aid, including grants, work-study, and federal student loans.

Even if you don’t think you’ll be eligible for federal student financial aid, it’s still a good idea to complete the FAFSA. Colleges often use the information from the form to determine eligibility for their own student financial aid, including merit aid.

Federal student financial aid can come in several forms:

•   Grants A grant is a form of financial aid that typically does not have to be repaid. Many grants, such as the Pell Grant, are awarded based on financial need. However, some are based on the student’s field of study, such as the Teacher Education Assistance for College and Higher Education (TEACH) Grant.

•   Work-Study Eligibility for Federal Work-Study is determined by information provided on the student’s FAFSA. Not all schools participate in the program, so check with a school’s financial aid office to see if it does. Work-study jobs can be on or off campus, and an emphasis is placed on the student’s course of study when possible.

•   Loans Federal student loan eligibility is another type of student aid determined by the FAFSA. There are three basic types of federal student loans : Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans. Direct Subsidized Loans are for eligible undergraduate students who have financial need. Direct Unsubsidized Loans are for eligible undergraduate, graduate, and professional students, but eligibility is not based on financial need. Direct PLUS Loans are for graduate or professional students, or parents of dependent undergraduate students, and eligibility is not based on need.



💡 Quick Tip: You can fund your education with a low-rate, no-fee private student loan that covers all school-certified costs.

Speak With the Financial Aid Office

Getting comfortable with the school’s financial aid office staff is a good thing. The office staff can be a font of knowledge for parents and students navigating the complex world of student financial aid. Not only can they help you understand what federal student financial aid you might be eligible for, they can also let you know what student aid is available through that particular school.

Financial aid office staff may also be able to point you toward other offices or departments on campus that may have job opportunities for students, or that offer emergency services for current students in the form of food or housing assistance.

Recommended: What Kind of Emergency Funding Is Available for College Students?

Let Your Student Take on a Part-time Job

Asking your child to work part-time while they are in school can help offset expenses. If Federal Work-Study isn’t a part of their financial aid package, they can still look for a job on or off campus to earn some money to put toward books and living expenses. Learning how to manage responsibilities is also an excellent out-of-the-classroom lesson.

Some ideas for jobs that may offer part-time, flexible hours for students include:

•   Babysitter or nanny

•   Coffee shop barista

•   Retail sales

•   Restaurant server or cook

•   Gym/fitness associate

Some part-time jobs might offer perks in addition to pay. Food service jobs might come with a discount on food during a shift, retail sales associates might get a discount on the store’s products, and working in a gym might come with a free gym membership. A visit to the campus career services office is often a good place to start looking for a part-time job.

Encourage a Gap Year

It’s not at all uncommon for a student to take a gap year between high school and college. Some students might not feel ready for college right out of high school. Others might want to have a specific experience, like travel or working in a specific field. Gap years can also allow students to earn money to pay for their future college expenses.

AmeriCorps is a federal program that pairs individuals with organizations that have a need. Volunteers can work in a variety of places and situations, from teaching to disaster relief to environmental stewardship, and more. Some AmeriCorps programs offer stipends, housing, or educational benefits like federal student loan deferment and forbearance, or a monetary award that can be used to pay for certain educational expenses.

Taking a gap year can give both you and your student time to build savings. It can also give your child an opportunity to gain work experience, or explore different professions. Of course, there can be drawbacks to taking a break from academics. It might be difficult to get back into the flow of studying after a year without that type of structure. Taking a year off without any structure or purpose might leave your child without a sense of accomplishment, so it’s generally a good idea to have a plan for how a gap year will be spent.

Consider a Less-Expensive College

Going to an in-state school vs. an out-of-state or private college is one obvious way to cut costs. Here are some other options to consider.

•   Community college Community colleges often charge much less tuition than their four-year counterparts. Choosing a community college close to home can also save on room and board. Your student might be able to start at a community college, then transfer to the college of their choice to complete their bachelor’s degree.

•   Tuition-free colleges There are some colleges that don’t charge tuition at all. Students at no-tuition schools may be required to maintain a certain grade point average, live in a certain region, or participate in a student work program. For example, service academies associated with branches of the U.S. military offer free tuition in exchange for a certain number of years of military enlistment.

•   Professional school Another option might be to bypass a traditional college degree for training in a specific career field instead. Training for non-degreed positions might last anywhere from a few months to a few years, depending on the job. For example, commercial airline pilots aren’t required to have a bachelor’s degree, but they are required to have a pilot’s license and pass exams specific to the airline they work for. Jobs in the construction industry generally don’t require a bachelor’s degree, either, but might have apprenticeship programs or on-the-job training lasting several years.



💡 Quick Tip: Would-be borrowers will want to understand the different types of student loans that are available: private student loans, federal Direct Subsidized and Unsubsidized loans, Direct PLUS loans, and more.

The Takeaway

Paying for college is a major expense, no matter how you look at it. Fortunately, there are a number of ways to cover the cost of higher education, including scholarships, grants, work-study, part-time jobs, and federal student loans.

If those options aren’t enough, you can also look into private student loans. These are available through banks, credit unions, and online lenders. Loan amounts vary but you can typically borrow up the full cost of attendance at your child’s school. Interest rates are set by individual lenders. Generally, students (or their parent cosigners) with excellent credit qualify for the lowest rates.

Just keep in mind that private loans don’t come with the same protections, like income-based repayment plans and forgiveness programs, that are offered by federal student loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.


Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.


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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.


SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 04/24/2024 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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Creative DIY Nursery Room Ideas

When you have a new baby on the way, you may be eager to create a nursery that’s comfortable, functional, and stylish. You can drop big bucks to turn a spare room into a dream nursery. But if you’re willing to put in some elbow grease and think outside the box, you could get the job done for much less.

Here are some creative DIY nursery ideas that won’t break the bank.

Use Paint to Make a Big Impact

If home improvement shows have taught us anything, it’s that paint can be a powerful — and cheap — way to change things up. In fact, for the cost of a few gallons of nontoxic paint, a roll of painter’s tape, and drop coverings, you can completely transform any room.

The options are limited only by your imagination. Paint all four walls the same shade to create a cohesive look, or focus the color on one wall to make a real statement. Use painter’s tape to create shapes or patterns, like stripes or chevrons, that pack the same punch as wallpaper but without the mess. If you’re artistic, paint a mural with animals or popular cartoon characters. Or considering all the time your baby will spend in their crib, you may decide to spiff up the ceiling with a pop of color.

Price tag: $125 to $250


💡 Quick Tip: Need help covering the cost of a wedding, honeymoon, or new baby? A SoFi personal loan can help you fund major life events — without the high interest rates of credit cards.

Get a Soft Rug

If you have hardwood floors, a soft rug won’t just help your feet stay warm when you come in for late-night feedings. You’ll also want a cozy surface for your baby to play, and later, learn to crawl.

You can get an area rug at a local hardware or furniture store that can bring out some of the colors in your decor and provide a soft buffer between your baby and the floor.

Price tag: $200

Make Your Own Art

Blank walls are boring, but art can be expensive to buy. So why not make your own creations?

One idea: Get jumbo letters from the local craft store that spell out your baby’s name and hang them on the wall.

Or figure out the theme of the room to help you come up with other ideas. For example, you can go to the zoo with a camera and then print out pictures of animals for an animal-themed room. Or become inspired by the night sky and put up sparkly stars and a moon on the walls. You can also find cool fabric and tack it onto a canvas for a fabric panel.

Price tag: From $25

Help Baby Sleep

Having a newborn goes hand in hand with frequent wake-up calls. But there are ways you can help baby settle down after a 3 a.m. feeding or stay asleep during a mid-afternoon nap.

Blackout curtains are a great way to prevent sunlight from seeping through window coverings — and interrupting a good nap. Making a set is doable with the help of a sewing machine and a trip to the local fabric store.

Hanging a mobile above the crib can also keep your little one entranced until their eyes start to close. You can make your own with everyday household and craft supplies, like pom poms, fabric, or paper. Simply attach the items to a string or embroidery floss, attach to a lightweight frame or embroidery hoop, and hang.

Price: From $10

Get Creative With Storage

Even if you’re a minimalist, chances are your baby will require a lot of stuff: clothes, toys, diapers, pacifiers, books…you get the idea. As you’re putting together your nursery, be sure you have ample places to store all those things. Bins, boxes, shelves, and drawers can make clean-up a breeze.

Storage systems don’t have to be expensive. You can get budget-friendly ones at local discount furniture stores. Or check online or garage sales for a used piece of furniture that you can refinish or repaint.

Just remember to fasten all the furniture to the wall so that when your baby starts pulling themselves up and walking, nothing topples over on them.

Price: From $100

Recommended: 25 Tips for Buying Furniture on a Budget

How Do You Pay for a Nursery Room Renovation

DIY-ing a nursery may save you money, but you’ll still need to make room in the budget. This can be a challenge if you’re also trying to balance the cost of hospital bills, doctor’s visits, and pricey essentials like a stroller, car seat, or crib. Here are some options you may want to consider.

Personal Savings

Tapping into your savings allows you to access the cash you need right away. However, if you’re planning to take unpaid maternity leave or are budgeting for medical expenses, you may decide it makes more sense to leave your emergency fund untouched.

Credit Card

Like personal savings, a credit card lets you pay for DIY nursery supplies now. However, at the end of the month, you’ll be billed for whatever you’ve spent. It’s important to make at least a minimum payment by the due date to avoid a late fee. But to avoid paying interest entirely, you’ll need to pay off the balance in full each month.

Recommended: Tips for Using a Credit Card Responsibly

Personal Loan

Generally speaking, a personal loan can be used for virtually anything, including decorating a nursery. Interest rates are relatively low, which means that you can likely get a loan at a low rate compared to a credit card. For that reason, it might be a much better idea than putting the expenses on a credit card, which typically have higher interest rates.

A typical term length for a personal loan is anywhere from one to 10 years. Extending your repayment over multiple years could reduce your monthly payments. But keep in mind, the longer the term length, the more you’ll pay in interest over the life of your loan.

When looking for a loan, you may want to look into securing a fixed interest rate so that you can lock in your low rate over the life of your loan.


💡 Quick Tip: Some personal loan lenders can release your funds as quickly as the same day your loan is approved.

The Takeaway

When you’re expecting a new baby, you naturally want to give them the world. This may include a room they’ll be happy to call their own. Fortunately, you can get the nursery of your dreams without having to spend a lot of money. There are creative, affordable ways to create a statement, like painting the walls or ceiling a fun shade or designing an adorable mural. Not as crafty? Explore simple, inexpensive projects, like making a mobile to hang over the crib.

If much of your budget is already earmarked for baby essentials and medical bills, you may want to explore alternate ways of paying for a nursery renovation. You could draw from your personal savings, use a credit card, or explore taking out a personal loan.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.


SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.


Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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IRA Withdrawal Rules: All You Need to Know

Guide to IRA Withdrawal Rules

The purpose of Individual Retirement Accounts (IRAs) is to allow you to save for your golden years, so there are strict IRA withdrawal rules meant to make it harder to access that money for other reasons.

Ideally you sock away money consistently and your investment grows over time. You also get the benefit of tax breaks. But it’s important to keep the IRA rules for withdrawals in mind to make the most of your accounts.

Key Points

•   Traditional and Roth IRAs have specific withdrawal rules and penalties to protect retirement savings.

•   Roth IRA withdrawal rules include the five-year rule for penalty-free withdrawals, and required minimum distributions for inherited IRAs.

•   Traditional IRA withdrawals before age 59 ½ incur regular income taxes and a 10% penalty.

•   There are exceptions to the penalty, such as using funds for medical expenses, health insurance, disability, education, and first-time home purchases.

•   Many experts recommend that early IRA withdrawals should be a last resort due to the potential impact on retirement savings and tax implications.

Roth IRA Withdrawal Rules

When can you withdraw from a Roth IRA? The rules for IRA withdrawals are different for Roth IRAs and traditional IRAs. For instance, qualified withdrawals from a Roth IRA are tax free, since you make contributions with after-tax funds. And there are some other rules about Roth IRAs to keep in mind as well.

The Five-year Rule

If you have a Roth IRA, you may face a Roth IRA withdrawal penalty if you withdraw funds you deposited less than five years ago. This is known as the “five-year rule“. These Roth IRA withdrawal rules also apply to the funds in a Roth rolled over from a traditional IRA. In those cases, if you make a withdrawal from a Roth IRA account that you’ve owned for less than five years, you’ll owe a 10% tax penalty on the account’s gains.

For inherited Roth IRAs, the five-year rule applies to the age of the account, so if your benefactor opened the account more than five years ago, you can access the funds penalty-free. If you tap into the money before that, you’ll owe taxes on the gains.

Required Minimum Distributions (RMDs) on Inherited Roth IRAs

If you’re wondering about Roth IRA distribution rules, in most cases, you do not have to pay required minimum distributions on money in a Roth IRA account. However, for inherited Roths, IRA withdrawal rules mandate that you take required minimum distributions.

There are two ways to do that without penalty:

•   Withdraw funds by December 31 of the fifth year after the original holder died. You can do this in either partial distributions or a lump sum. If the account is not emptied by that date, you could owe a 50% penalty on whatever is left.

•   Take withdrawals each year, based on your life expectancy.

Get a 1% IRA match on rollovers and contributions.

Double down on your retirement goals with a 1% match on every dollar you roll over and contribute to a SoFi IRA.1


1Terms and conditions apply. Roll over a minimum of $20K to receive the 1% match offer. Matches on contributions are made up to the annual limits.

💡 Quick Tip: Did you know that you must choose the investments in your IRA? Once you open a new IRA and start saving, you get to decide which mutual funds, ETFs, or other investments you want — it’s totally up to you.

Traditional IRA Withdrawal Rules

If you take funds out of a traditional IRA before you turn 59 ½, you’ll owe regular income taxes on the contributions and the gains, per IRA tax deduction rules, plus a 10% penalty. Brian Walsh, CFP® at SoFi specifies, “When you make contributions to a traditional retirement account, that money is going to grow without paying any taxes. But when you take that money out—say 30 or 40 years from now—you’re going to pay taxes on all of the money you take out.”

RMDs on a Traditional IRA

The rules for withdrawing from an IRA mean that required minimum distributions kick in the year you turn 73. After that, you have to take distributions each year, based on your life expectancy. If you don’t take the RMD, you’ll owe a 50% penalty on the amount that you did not withdraw.

When Can You Withdraw from an IRA Without Penalties?

You can make withdrawals from an IRA once you reach age 59 ½ without penalties.

In addition, there are other situations in which you may be able to make withdrawals without having to pay a penalty. These include having medical expenses that aren’t covered by health insurance (as long as you meet certain qualifications), having a permanent disability that means you can no longer work, and paying for qualified education expenses for a child, spouse, or yourself.

Read more about these and other penalty-free exceptions below.

9 Exceptions to the 10% Early-Withdrawal Penalty on IRAs

Whether you’re withdrawing from a Roth within the first five years or you want to take money out of a traditional IRA before you turn 59 ½, there are some instances where you don’t have to pay the 10% penalty on your IRA withdrawals.

1. Medical Expenses

You can avoid the early withdrawal penalty if you use the funds to pay for unreimbursed medical expenses that total more than 7.5% of your adjusted gross income (AGI).

2. Health Insurance

If you’re unemployed for at least 12 weeks, IRA withdrawal rules allow you to use funds from an IRA penalty-free to pay health insurance premiums for yourself, your spouse, or your dependents.

3. Disability

If you’re permanently disabled and can no longer work, you can withdraw IRA funds without penalty. In this case, your plan administrator may require you to provide proof of the disability before signing off on a penalty-free withdrawal.

4. Higher Education

IRA withdrawal rules allow you to use IRA funds to pay for qualified education expenses, such as tuition and books for yourself, your spouse, or your child without penalty.

5. Inherited IRAs

IRA withdrawal rules state that you don’t have to pay the 10% penalty on withdrawals from an IRA, unless you’re the sole beneficiary of a spouse’s account and roll it into your own, non-inherited IRA. In that case, the IRS treats the IRA as if it were yours from the start, meaning that early withdrawal penalties apply.

Recommended: Inherited IRA Distribution Rules Explained

6. IRS Levy

If you owe taxes to the IRS, the agency may take it directly out of your IRA account. In that case, the IRS will not assess the 10% penalty. If you take the money out of the account yourself, however, to pay taxes, you’d also have to pay the 10% penalty.

7. Active Duty

If you’re a qualified reservist, you can take distributions without owing the 10% penalty. This goes for a military reservist or National Guard member called to active duty for at least 180 days after September 11, 2001.

8. Buying a House

While you can’t take out IRA loans, you can use up to $10,000 from your traditional IRA toward the purchase of your first home — and if you’re purchasing with a spouse, that goes for each of you. The IRS defines first-time homebuyers as someone who hasn’t owned a principal residence in the last two years. You can also withdraw money to help with a first home purchase for a child or your spouse’s child, grandchild, or parent.

In order to qualify for the penalty-free withdrawals, you’ll need to use the money within 120 days of the distribution.

9. Substantially Equal Periodic Payments

Another way to avoid penalties under IRA withdrawal rules, is by starting a series of distributions from your IRA, spread equally over your life expectancy. To make this work, you must take at least one distribution each year and you can’t alter the distribution schedule until five years have passed or you’ve reached age 59 ½, whichever is later.

The amount of the distributions must use an IRS-approved calculation that involves your life expectancy, your account balance, and interest rates.

💡 Quick Tip: Before opening an investment account, know your investment objectives, time horizon, and risk tolerance. These fundamentals will help keep your strategy on track and with the aim of meeting your goals.

Is Early IRA Withdrawal Worth It?

While there may be cases where it makes sense to take an early withdrawal, most advisors agree that it should be a last resort. These are disadvantages and advantages to consider.

Pros of IRA Early Withdrawal

•   If you have a major expense and there are no other options, taking an early withdrawal from an IRA could help you cover the cost.

•   An early withdrawal may help you avoid taking out a loan you would then have to repay with interest.

Cons of IRA Early Withdrawal

•   By taking money out of an IRA account early, you’re robbing your own nest egg not only of the current value of the money but also future years of compound growth.

•   Money taken out of a retirement account now can have a big impact on your financial security in the future when you retire.

•   You may owe taxes and penalties, depending on the specific situation.

Opening an IRA With SoFi

Like 401(k)s, IRAs are powerful, tax-advantaged accounts you can use to save for retirement. However, it is possible to take money out of an IRA if you need it before retirement age. Just remember, even if you’re able to do so without an immediate tax penalty, the withdrawals could leave you with less money for retirement later.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Easily manage your retirement savings with a SoFi IRA.

FAQ

Can you withdraw money from a Roth IRA without penalty?

You can withdraw your own contributions to a Roth IRA without penalty no matter what your age. However, you cannot withdraw the earnings on your contributions before age 59 ½, or before the account has been open for at least five years, without incurring a penalty.

What are the rules for withdrawing from a Roth IRA?

You can withdraw your own contributions to a Roth IRA at any time penalty-free. But to avoid taxes and penalties on your earnings, withdrawals from a Roth IRA must be taken after age 59 ½ and once the account has been open for at least five years.

However, there are a number of exceptions in which you typically don’t have to pay a penalty for an early withdrawal, including: some medical expenses that aren’t covered by health insurance, being permanently disabled and unable to work, or if you’re on qualified active military duty.

What are the 5 year rules for Roth IRA withdrawal?

Under the 5-year rule, if you make a withdrawal from a Roth IRA that’s been open for less than five years, you’ll owe a 10% penalty on the account’s earnings. If your Roth IRA was inherited, the 5-year rule applies to the age of the account. So if you inherited the Roth IRA from a parent, for instance, and they opened the account more than five years ago, you can withdraw the funds penalty-free. If the account has been opened for less than five years, however, you’ll owe taxes on the gains.


Photo credit: iStock/Fly View Productions

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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