Update May 2009: The Wall Street Journal reports that early withdrawals from retirement accounts are up 44% over October of 2008. As more of us tap out our savings, this advice on how to raid our IRAs with the least damage is even more timely.

If you need quick cash, your retirement savings can look like a great place to find the lump sum you need, but tread carefully. There are lots of rules and if you don't qualify for an eligible withdrawal you'll have to pay a 10% penalty plus taxes on the money at your current income tax rate.

So suppose you need about $10,000 and are in the 25% tax bracket: in order to get that net amount you would need to withdraw $15,500. Of that amount 10% ($1,550) would go toward paying the penalty and 25% ($3,875) would go toward taxes, which totals $5.425. From that $15,500, you would be able to use $10,075. Let's say you think you will have enough to repay that money in a couple of years. Forget about it. You can't replace retirement funds you withdraw. You've lost the savings opportunity forever.

Now let's suppose you kept the money in the account and invested it for 20 years at a return rate of 8%. That $15,500 would be worth about $75,000. You must think about whether it Is really worth it to you to lose that savings opportunity or do you want to find another solution for getting the funds together.

These calculations are based on a 10% penalty, but you can avoid that penalty with certain types of withdrawals. All IRA withdrawals, unless you have a ROTH IRA, require that you pay income taxes at your current income tax rate on money you take out of the IRA.

You don't have to worry about a penalty once your are 59 1/2, but if you are younger here are some ideas for how to tap your IRA penalty free:

* If you are between the ages of 55 and 59 1/2, you can annuitize your IRA. That means you take out a set amount based on your expected lifespan. The IRS has tables to help you figure this out.
*You can take a 60-day IRA loan by pulling out the money and replacing it in 60 days. Be sure you keep proof for the IRS about the exact day you took the money out and the exact day you put it back in. If not, you'll be socked with income taxes and penalties.
*If you have a ROTH IRA, you can take out any contributions you've made without taxes or penalties.
*If your buying your first home, you can take up to $10,000 out for a downpayment.
*If you are withdrawing money for higher education, you can use your IRA for eligible education expenses.
*If you've become disabled and can't work, you can start drawing funds without penalty, but you could be asked to prove your disability.
*If you're unemployed and need money to pay for health insurance after 12 weeks of collecting unemployment benefits, you can use the money penalty-free for health insurance.
*If your medical expenses exceed 7.5% of your adjusted gross income, you can pay those expenses.

If you do want to use your IRA cash for one of these reasons, you may be able to avoid the penalty, but unless you have a ROTH IRA, you will have to pay income taxes on the money taken out. Do be careful to read the rules for each of these types of withdrawals to be sure you qualify.

While you may be able to legally take money out of your retirement plan, it should be down at the bottom of your list. Once you take it out you can't repay it.

Lita Epstein is the author of more than 20 books including "Working After Retirement for Dummies."