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True or False:

You can withdraw money from your IRA penalty-free to buy your first home

TRUE. You can withdraw early and without penalty from your Traditional, Roth, SEP or SIMPLE IRA if you're buying or re-building your first home and need a maximum of $10,000 for a down payment (including closing cots).

Typically if you withdraw money early (pre age 59.5 ) from a Traditional, SEP or SIMPLE IRA, you'd owe income taxes and a penalty tax equal to 10% of the withdrawal. If you withdraw early from a Roth IRA, the amount you withdraw is taxed as if it is regular income. You've already paid taxes on it when you opened it, so why would you want to pay those same taxes TWICE?

By the way, you can avoid penalties and extra taxes in other ways – find out how in IRA Withdrawals and Penalties.

Next: Question #2