Roth IRA Withdrawal Rules When and How Much Can You Get

When you first open a Roth IRA, your contributions are a no-risk proposition. You can't get that money back until after you've left the workforce and transitioned to your retirement years. At that point, you can take withdrawals from your Roth as an old codger with few other income sources. Withdrawals before age 59 1/2 are subject to tax penalties. Still, there are some exceptions to these rules and special circumstances where making an early Roth IRA withdrawal might be worthwhile. The Roth IRA withdrawal rules outline when, how much, and under what conditions you can access your money after you've contributed it. Technically, you don't own any of that money while it's in the account. It is held in trust on your behalf by the financial institution where you have opened the Roth IRA account. The trustee will only release ownership over those funds when certain conditions are met. Here we'll review the IRS rules regarding making a withdrawal from a Roth IRA account (and, as always, consult with a tax professional before making decisions like this).

Roth IRA Withdrawal Rules

When you first open a Roth IRA, your contributions are a no-risk proposition. You can't get that money back until after you've left the workforce and transitioned to your retirement years. At that point, you can take withdrawals from your Roth as an old codger with few other income sources. Withdrawals before age 59 1/2 are subject to tax penalties. Still, there are some exceptions to these rules and special circumstances where making an early Roth IRA withdrawal might be worthwhile. The Roth IRA withdrawal rules outline when, how much, and under what conditions you can access your money after you've contributed it. Technically, you don't own any of that money while it's in the account. It is held in trust on your behalf by the financial institution where you have opened the Roth IRA account. The trustee will only release ownership over those funds when certain conditions are met.

Roth IRA Withdrawals Before Age 59 ½

The Roth IRA withdrawal rules dictate that you have to wait until age 59 1/2 to take any money out of the account. That includes both contributions and earnings accrued on those contributions. There are no special provisions for early retirement or a medical emergency. Suppose you're younger than 59 1/2 and decide to withdraw money from your Roth IRA. In that case, you'll have to pay a 10% early withdrawal penalty on the earnings. The earnings on your Roth IRA contributions fall under the same rules as any other income: they're taxable. They will be subject to federal and state income taxes. Strictly speaking, you're not even allowed to take a loan from your Roth IRA, let alone withdraw money from it. When you withdraw money early, the Roth IRA withdrawal rules require that you pay back the amount you withdrew plus the 10% penalty for early withdrawal.

Roth IRA Required Withdrawal at Age 70 ½

The Roth IRA withdrawal rules dictate that you have to begin taking distributions from your Roth IRA every year once you've reached age 70 ½. You have to take a single annual distribution from your Roth IRA account. If you don't, the Roth IRA trustee will be required to take a distribution on your behalf. The rules don't give you the option to simply allow the money to keep growing in your account. The Roth IRA required distribution is calculated based on your life expectancy as calculated by the IRS. If you don't take the required distribution, you will have to pay a 50% penalty on the amount that should have been withdrawn. In some cases, it might make sense to take a larger distribution from your Roth IRA than the IRS rules mandate.

Exceptions to the Rule for Early Withdrawals

A few exceptions to the Roth IRA withdrawal rules allow you to withdraw money from your Roth IRA account before age 59 1/2 without paying the 10% penalty for early withdrawal. The first is if you become disabled and can't work. At that point, you can withdraw money from your Roth IRA account without paying the penalty. If you're suffering from a medical emergency, you can withdraw money from your Roth IRA without the 10% penalty. Certain medical expenses (as defined by the IRS) can be deducted from your taxes. If you need to draw on your Roth IRA to pay those medical bills, it won't result in a penalty. Another exception to the Roth IRA withdrawal rules is in the event of financial hardship.

Tax Penalties for Early Withdrawals From a Roth IRA

The Roth IRA withdrawal rules dictate that you have to wait until age 59 1/2 to take any money out of the account. That includes both contributions and earnings accrued on those contributions. There are no special provisions for early retirement or a medical emergency. Suppose you're younger than 59 1/2 and decide to withdraw money from your Roth IRA. In that case, you'll have to pay a 10% early withdrawal penalty on the earnings. The earnings on your Roth IRA contributions fall under the same rules as any other income: they're taxable. They will be subject to federal and state income taxes. Strictly speaking, you're not even allowed to take a loan from your Roth IRA, let alone withdraw money from it. When you withdraw money early, the Roth IRA withdrawal rules require that you pay back the amount you withdrew plus the 10% penalty for early withdrawal.

Knowing When and How to Withdraw From Your Roth IRA

The Roth IRA withdrawal rules dictate that you have to wait until age 59 1/2 to take any money out of the account. There are a few exceptions to the rule, but in all cases, you'll have to pay a 10% penalty on the earnings withdrawn. You'll also have to pay federal and state income taxes on those earnings. It's important to know when and how you can access the money you've contributed to your Roth and how much it will cost you to do so. The best thing about a Roth IRA is that you can make contributions at any age. You can start contributing at any point, even if you are retired. The longer the money is allowed to grow, the more valuable it will be to you. When you know the rules governing withdrawals from a Roth IRA, you're in a better position to make the most of your contributions.

Conclusion

The Roth IRA withdrawal rules state that you're decreasing the value of your retirement savings whenever you withdraw money from your Roth IRA. It's always better to leave that money in the account as long as you can. You never know what the future might bring, and having a Roth IRA to fall back on can make a real difference.