Use rule 72 (t) to avoid retirement penalties. Keep an eye on where the distributions are coming from. Here are some of the strategies you can use to minimize the taxes you'll pay when you withdraw money from your IRA. Possibilities include converting traditional IRAs into Roth IRAs, having several IRAs, donating IRA values to a charity, or creating a QLAC.
Since many of them involve some complexity, you may want to consult a financial advisor so you don't risk having to pay a large tax bill at the end of the year. When you invest in a Roth IRA, you deposit your money once it's been taxed. When you withdraw money, presumably after you retire, you don't pay taxes on the money you withdraw or on the profits you earned with your investments. Moving from a traditional IRA to a Roth IRA might make sense if you think you'll be in a higher tax bracket when you start withdrawing funds, can pay conversion tax from outside sources, and have a reasonably long time horizon for assets to grow.
There are some exceptions due to financial hardship to the penalties for withdrawing money from a traditional IRA or from the investment earnings portion of a Roth IRA before turning 59 and a half years old. The other time you risk receiving a tax penalty for withdrawing money early is when you transfer money from one IRA to another qualified IRA. If you expect your tax bracket to be higher when you retire than it is now, it may make sense to convert your traditional IRA to a Roth IRA. Converting a Roth IRA is the process of converting your traditional IRA into a Roth IRA.
Another strategy is to convert part of your traditional IRA into a Roth IRA in years when you expect to be in a lower tax bracket. There are several IRA options and many places to open these accounts, but the Roth IRA and the traditional IRA are by far the most popular types.