IRA Rules

Archive for August, 2011

Question: Roth IRA early withdrawal rules?

I know that a 401k or a traditional IRA because your contributing portion of your gross income or tax deductible dollars, if you were to access it before the age of 59 and 1/2 you will face 10% penalty + taxes. For a Roth IRA, since your contributing your after tax dollars, if you tap into it earlier than age 59 and 1/2 will you face only the 10% penalty? or still both 10% penalty + taxes?

Answer: Wayne Z’s got it right.

Contributions can be removed, anytime (despite what you read from other responders on Y!A), without tax or penalties. The ordering rules for Roth withdrawals is contributions first. Taxes and penalties apply ONLY to earnings, if any.The 5-year holding period begins on Jan 1 of the year to which your first Roth contribution applies. You need only satisfy it once.

Each conversion, however, has its own 5-yr holding period.

Hope that answers your question and earns your Best Answer vote!

DISCLAIMER FOR PROFESSIONALS: While the information in this response was obtained from sources believed to be reliable, its accuracy and completeness cannot be guaranteed. The opinion voiced in this answer is for general information only and it shall not be construed as tax, legal, or investment advice for any individual. Questioners are urged to consult with their professional advisers before making any decisions regarding their finances.

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