ALTHOUGH 59 1/2 is generally the magic age for starting to receive IRA distributions without getting hit with the federal 10% premature withdrawal penalty tax (whether you continue to work or not), there are some circumstances under which you can get at your IRA funds even earlier without the penalty. Here's a rundown:

Annuitize Your IRA
One way to take money from your traditional IRA without incurring the 10% penalty is to "annuitize" your account. The way this works is that for five years, or until you turn age 59 1/2 (whichever is longer), you take annual cash withdrawals based on your life expectancy, as predicted by the IRS. To see how much time the IRS thinks you have left, visit the IRS Web site.

Here's an example. If the IRS actuarial tables predict you will live for another 20 years, then you can withdraw 1/20th of the balance in your account the first year and the same dollar amount in the years after. During the payout period, your distribution schedule cannot change or you will be hit with the 10% penalty. Once the payout period has ended, you can modify the schedule, take a lump payment or stop taking distributions altogether. If you do decide to take early withdrawals, consult a tax expert who has some experience in planning for penalty-free IRA distributions.

Withdraw Roth Contributions
The Roth IRA allows penalty and tax-free withdrawals of contributions for any reason. But remember, once you've taken out that money, you don't have the option of replacing it.

Take a 60-Day Loan
You can withdraw funds from your IRA for up to 60 days tax- and penalty-free as long as you return the funds to an IRA by the end of the 60-day period. The IRS looks at this as a nontaxable rollover. Just make sure that the funds are back in an IRA within the 60 days, otherwise it will be treated as a withdrawal that is subject to taxes and penalties if you are under age 50 1/2. Also, if you follow this strategy, you can only do it once within a 12-month period for the account in question.

Special Penalty-Free Withdrawal Situations
First-time home purchase: Up to $10,000.
Qualified education expenses: For you, your spouse, your kids or even your grandkids. Approved expenses include post-secondary education, tuition, books, supplies and, if the student is enrolled at least half-time, room and board.
Disability: To qualify for a disability exemption, you must prove that you are incapable of working.
Unreimbursed medical expenses: Expenses must exceed 7.5% of your adjusted gross income.
Health insurance for the unemployed: Only after 12 consecutive weeks of collecting unemployment benefits.

A final note: Before you start dipping into your retirement stash, you should explore other options including a standard bank loan. If you must withdraw funds from an IRA, avoid paying taxes by withdrawing contributions from your Roth IRA first. And tap a tax-deductible IRA last. Above all, use these tax-sheltered accounts as a last resort. And before you raid your retirement savings, make sure you are leaving enough to support your actual retirement. Use our retirement worksheets to help you make your calculations.

* $10,000 lifetime maximum

* Exceptions include: (a) withdrawals for medical expenses in excess of 7.5% of adjusted gross income (b) if you choose to annuitize withdrawals as explained earlier in this article
Source: Your Tax Questions Answered, Ed Slott, Plymouth Press Ltd., 1998.