IRA rules-Roth IRA Withdrawal Rules

Roth IRA withdrawal rules lay out the circumstances when a Roth IRA account owner may withdraw money from his or her Roth IRA account. As discussed in the Roth IRA distributions section of this IRA Rules website, there are three Roth IRA tax rules on funds withdrawn from a Roth IRA individual retirement account.

Ordering Rules for Non-Qualified Distributions of Roth IRA withdrawal rules

If the Roth IRA individual retirement account is a combination of both regular (annual) IRA contributions and conversion amounts, for tax purposes, under the Ordering Rules of Roth IRA withdrawal rules, distributions from the Roth IRA account will be considered ordered as follows:

First, Regular (annual) Roth IRA contributions may be removed from a Roth IRA individual retirement account any time, for any reason, tax and penalty free.
Next, conversions will not be taxed a second time; however, if the non-qualified Roth IRA distribution is taken less than five years after the year of the conversion, the 10% premature distribution penalty will be assessed, unless a Life Event Exception applies.
Last, earnings will be taxed and subject to a 10% premature Roth IRA distribution penalty, unless a Life Event Exception applies.

Life Event Distributions for tax free and penalty free Roth IRA distributions under the Roth IRA withdrawal rules

Earnings may be distributed from a Roth IRA account under the Roth IRA withdrawl rules before reaching age 59½, without the 10% premature distribution penalty, if it is used for one of the following Life Event Roth IRA withdrawl rules exceptions:

Purchase of a first home, up to $10,000 lifetime maximum
Qualified Higher Education Expenses
Medical Expenses that exceed 7.5% of A.G.I.
Payment of health insurance premiums during long-term periods of unemployment
Substantially Equal Payments Under Section 72(t)
Disability
Death

Roth IRA withdrawal rules of five-year holding period

Roth IRA rules has a special rule regarding the holding period of a Roth IRA account. The Five-Year Holding Period is considered to begin on January 1st of the year for which the IRA owner makes the first contribution of any type (including conversions) to any Roth IRA account and ends at the end of five full calendar years. Once the Five-Year Holding Period has been satisfied with respect to any Roth IRA contribution, it is deemed to be satisfied for all later Roth IRA contributions.