Tax Filing Deadline

• In order to get the up-front tax break for contributing to an IRA, you must make your annual contribution no later than the tax filing deadline. That deadline is usually April 15, but the IRS may extend it if that date falls on a holiday or a weekend. If you are close to the tax filing deadline and still have not made your annual IRA contribution, be sure to get your contribution in on time. If you fund your account electronically by transferring money from your bank account, keep in mind that even a direct transfer can take a few days to complete.
  
  

Age 59 1/2

• As of 2011, IRA investors face time constraints regarding when and how they can withdraw the money in their accounts. Investors who access their funds prior to age 59 1/2 face taxes and penalties on the money they withdraw. After investors reach the age of 59 1/2, they can take distributions to meet their retirement income needs. Investors who wait until age 59 1/2 to begin their distributions do pay taxes on the money they take out, but they avoid the tax penalty that applies to early withdrawals.
  
  

Age 70 1/2

• The IRS also places time constraints on how long money can remain in your IRA without withdrawing the money and paying taxes. If you hold a traditional IRA, you must begin taking distributions from that account once you reach the age of 70 1/2. These are required minimum distributions; a formula developed by the IRS determines the amount you must withdraw. This formula includes the current balance in your IRA account and your life expectancy, so the older you are the more you must withdraw. You pay taxes on those required minimum distributions at your ordinary income tax rate.
  
  

72t Provision

• You can avoid the time constraints that ordinarily apply to IRA withdrawals by using a special provision in the tax code. If you plan to retire early, or if you find yourself forced to retire early, you can withdraw the money in your IRA without penalty if you use the 72t provision. Under the 72t provision, IRA owners can receive substantially equal amounts from their accounts each year, based on a formula that includes their age and the balance in the account. IRA owners must continue this plan for five years, or until you reach age 59 1/2, whichever is longer. The amount younger workers can withdraw can be limited, because the formula uses the balance of the account and projected life expectancy to determine the withdrawal amount.