tax errors and retirementYou may be able to use money you’ve saved for retirement to support your financial goals in the here and now—but the tax laws detailing how, when and for what purpose you can use your retirement funds before you’re of retirement age can be complex.

Here are three costly tax errors to avoid before you decide to tap into your retirement funds.

Tax Error #1: Not confirming that the purpose for which you’ll use retirement money will qualify as an exemption. The IRS allows you to access some of your retirement funds before you’re age 59 ½ without requiring that you pay the typical 10% early penalty withdrawal–but the rules only apply if you’ll use the money for a purpose that’s on the IRS’ list of approved exceptions.  If you’ll use retirement money to pay for school for yourself, your spouse, kids or grandchildren, for example, you may be exempt from the early withdrawal penalty—IF the educational institution is on the “IRS-approved” list of qualifying schools. Additionally, only certain expenses (like tuition and fees) qualify; room and board, insurance and medical expenses don’t count as exempt costs.

Likewise, first time home-buyers (which is technically defined as people who have not owned a property in the last two years) may be able to access up to $10,000 of retirement funds to buy a home without incurring an early withdrawal penalty—but the money must be used within 120 days from the time it’s withdrawn to qualify. If you’re looking to buy in a market where demand is high and inventory is low, adhering to the IRS’ timeline to qualify for the exemption may prove challenging. (If you’re nearing the 120 mark and have yet to find a home to buy or construction on a home you intend to build is delayed—put the money back into your account before the deadline to avoid the penalty).

Tax Error #2: Misunderstanding the importance of retirement account type. There are many different types of retirement accounts—including 401(k) and 403(b) plans, individual retirement accounts (IRA’s), SEP IRA’s for the self employed, ROTH IRA’s, and pensions. Just as the tax advantages of each plan differ, so does the policy for whether funds that are withdrawn before retirement age qualify for exemption from the early withdrawal penalty. If you wish to use some of your retirement funds to buy a home or pay for school, for example, money you take from an IRA or a SEP IRA qualify as exempt; funds withdrawn from a 401(k) plan are not.

Tax Error 3#: Misunderstanding the details of timing. If you want to use funds held in a ROTH IRA, avoiding the 10% penalty depends on timing. If you’ve had the ROTH account for at least five years, you may avoid both taxes (which you’ve already paid) and the early withdrawal penalty (assuming how you use the money qualifies for an exemption). If you’ve had the ROTH account for less than five years, on the other hand, you could owe tax on the earnings you withdraw.

If you’ll use retirement funds to pay for medical expenses that exceed 10% of your adjusted gross income, you may avoid the penalty—but only if you take the money out in the same year that you incurred the medical expense.  If you’re unemployed and tap into retirement funds to pay for health insurance, the timing requirements to avoid the early withdrawal penalty are even more complex. You must claim 12 weeks of consecutive unemployment benefits, withdraw the funds in the year or year after you receive the unemployment benefits, and take the distribution within 60 days when you find a new job.

Timing of early withdrawals is important for military personnel to understand, too: Distributions cannot be taken before the call to active duty, or after the active duty period ends.