West Virginia State Life Insurance Practice Exam

At what age can an IRA owner begin making withdrawals without incurring a tax penalty?

1. 55

2. 59 1/2

3. 62

4. 65

The correct answer is: 59 1/2

An IRA (Individual Retirement Account) owner can begin making withdrawals without incurring a tax penalty at age 59½. This age is established by the Internal Revenue Service (IRS) as the point at which individuals are allowed to access their retirement funds without facing the additional 10% early withdrawal penalty typically applied to distributions taken before this age. The rule is designed to encourage individuals to save for retirement and to discourage premature withdrawals that could jeopardize their long-term financial health. While withdrawals can still be subject to regular income tax regardless of age, turning 59½ means the individual can avoid that extra penalty, making it a critical age for IRA holders planning their retirement income strategy. Other ages listed, such as 55, 62, and 65, do not align with the regulations governing early withdrawals from IRAs, as they may pertain to specific rules for other retirement plans or social security benefits but do not apply to the general IRA withdrawal penalty.