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Follow rules to draw from IRA before age 59{

Q. I am 52 and would like to supplement my income by withdrawing money from my individual retirement account. I heard that there is a way to get the money out without penalty even though I am younger than 59{. How would it work?

A. There is indeed a way around the penalty for someone in your position. The rule is that you can take penalty-free distributions if they are part of a series of substantially equal periodic payments based on your life expectancy or the joint life expectancy for you and your beneficiary. The withdrawals must be made at least annually and must continue for at least five years or to age 59{, whichever is longer.

You may want to get a financial adviser to help you calculate the correct amount to withdraw. You have some flexibility: If you have multiple IRA accounts, you can use any combination of the accounts to calculate the size of your distributions.

You also have some other choices in how you set up your plan. But once payments begin, you cannot make changes. If you do, the 10 percent penalty can be applied retroactively to any withdrawals you already have taken.

There are enough wrinkles in all this that Gordon Weis, director of pensions for Illinois Mutual Life, has created a Web site devoted solely to this subject (

He suggests contacting your IRA custodian regarding your distribution plan and the tax reporting for it. A code can be entered on your 1099 form indicating that an exception to the early distribution penalty applies. If no exception is indicated, you will need to file Form 5329 to claim the exemption.

Q. My husband thinks his father should put my husband's name on his house, car, bank accounts, retirement accounts, etc. He says that when his father passes away, these possessions would automatically be his and not be part of the estate, so they would not have to go through probate. Is this a good idea?

A. Yes and no. I presume that your husband is your father-in-law's only heir. In that case, it is an excellent idea for your husband to be named as the payable-on-death beneficiary of his father's bank accounts and retirement accounts. If this is done, these accounts will pass directly to him and avoid probate.

If there are multiple heirs, it is not a good idea to put everything in one person's name and expect him or her to share with the others. It also is not a good idea to divide an estate by naming one person beneficiary of Account A and another person beneficiary of Account B. These techniques may create hard feelings and may end up unintentionally disinheriting someone.

Putting another person's name on a bank account as a co-owner is a convenience, allowing both people to easily write checks. I don't have a problem with that, assuming that both parties are happy with the arrangement. However, I don't favor going beyond that with co-ownership. One reason is liability. Suppose your father-in-law caused a car accident and an injured person sued your husband as co-owner of the car? Your husband's liabilities also could come back to haunt his father. Someone who obtained a judgment against your husband could go after assets he owned jointly with his father.

It would be better for your husband and his father to consult a lawyer and develop an estate plan. A will and a durable power of attorney might be sufficient, particularly if your husband can be listed as beneficiary on most of his father's accounts. In some cases, especially in more complicated estates, a trust is a better option.

Q. I bought a condo for $100,000 and would like to withdraw the money in my individual retirement account to pay off the mortgage. Are their tax ramifications?

A. Yes. You will owe income taxes on the money you withdraw from your IRA. In addition, if you are younger than 59{, you will have to pay a 10 percent penalty.

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_ Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.