An IRA is a powerful tool that allows you to save for retirement. The tax-deferred or tax-free status of your IRA provides an incentive to keep your funds invested. Withdrawing from your IRA may subject you to taxes and penalties depending on your age, type of IRA, and how long your account has been funded. We recommend consulting a qualified tax professional prior to making this withdrawal.

Due to IRS reporting requirements, distributions may reflect as "taxable" on your 1099-R even if your situation does not warrant taxable income. To determine how much, if any, of the distribution is taxable and how to report it on your income tax return, please refer to IRS guidance for Form 8606 and Form 1040, lines 4a & 4b.

Since Traditional IRAs are tax-deferred, income tax will always be owed on withdrawals. This includes withdrawals of contributions and of any potential gains.

In addition to income tax, an early withdrawal penalty may also be owed if you are younger than age 59½. Common exceptions to this penalty include qualified higher education expenses, qualified first-time home buyer, and an excess contribution removal prior to the extended tax deadline. Disability and death of an account owner also qualify as exceptions to the early withdrawal penalty.

Required minimum distributions (RMDs) must begin by April 1 of the year following the calendar year in which you turn 72 (73 if you reach age 72 after Dec. 31, 2022)*. In subsequent calendar years, your RMD amount must be withdrawn by December 31st. Failure to withdraw your RMD may result in an IRS penalty of up to 50% of the RMD amount.

Roth IRAs are funded with post-tax funds, meaning you’ve already paid income tax on these contributions. As a result, contributions to Roth IRAs can be withdrawn at any time, tax and penalty free.

To avoid paying taxes or early withdrawal penalties on the gains in your account, the withdrawal must be considered Qualified. Typically, this means that the account has been funded for at least five years and that you are older than age 59½, have a disability, or that you qualify for an exception.

Unlike Traditional and SEP IRAs, there are no required minimum distributions (RMDs) from a Roth IRA, given that you are the original account owner.

SEP IRAs have similar withdrawal rules to Traditional IRAs, and income tax is owed on any withdrawal from this type of IRA.

An early withdrawal penalty of 10% may also be assessed for withdrawals that occur prior to age 59½, although some exceptions to this penalty may apply.

Required minimum distributions are also mandatory from SEP IRAs beginning by April 1 of the year following the calendar year in which you turn 72 (73 if you reach age 72 after Dec. 31, 2022)*. The penalty for not withdrawing your RMD amount on an annual basis may be up to 50% of the RMD amount.

If you decide to withdraw from your IRA, we recommend reviewing M1’s list of distribution reasons prior to withdrawing from your IRA to ensure that you are choosing the correct reason. Additionally, we encourage you to consult a qualified tax professional if you have any further questions about potential taxes or penalties owed on your withdrawal.

*If you reach age 72 in 2023, the required beginning date for your first RMD is April 1, 2025, for 2024. If you reach age 73 in 2023, you were 72 in 2022 and subject to the age 72 RMD rule in effect for 2022. If you reach age 72 in 2022,

M1 and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. It is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.

Brokerage accounts on the M1 platform are either fully disclosed to APEX Clearing or cleared through M1 Finance LLC. Please look at your account statement to determine how your account is cleared.

All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future performance. Using margin can add to these risks. Users utilizing APEX cleared margin accounts should review the APEX margin account risk disclosure before borrowing. Users utilizing M1 cleared margin accounts should review the M1 margin account risk disclosure before borrowing. M1 Margin Loans are available on margin accounts with at least $2,000 invested per account. Not available for Retirement or Custodial accounts. Margin rates may vary.

Brokerage products and services are offered by M1 Finance LLC, Member FINRA / SIPC, and a wholly owned subsidiary of M1 Holdings, Inc.

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