Roth IRA Withdrawal Rules

One of the most important things that people with an IRA want to know is ‘how can I access my savings?’  In this case, what are the Roth IRA Withdrawal Rules?  There are two main areas of a Roth IRA that withdrawal rules apply to: Contributions and Earnings.  Contributions consist of the cumulative amount of money that you have put into your Roth IRA over the years you have owned it.  Earnings on the other hand are the money that your Roth IRA has generated by using your investments.

Roth IRA Withdrawal Rules for ContributionRoth IRA Withdrawal Ruless

One of the main benefits of a Roth IRA is the lack of restrictions placed on the withdrawal of contributions.  The Roth IRA withdrawal rules state that you may withdraw your contributions at any time tax free and penalty free!  This is a huge incentive for owning a Roth IRA if you feel you may have unexpected expenses and would like the flexibility to be able to pull money out of your savings for an emergency.

Roth IRA Withdrawal Rules for Earnings

The Roth IRA withdrawal rules are a little more restrictive for earnings, but not a great deal so.  A qualified withdrawal is defined as a withdrawal made when your Roth IRA is at least 5 years old and you are at least 59.5 years of age.  If you meet both of those conditions you will pay no fees or taxes on your earnings.

If you withdraw your earnings and you do not meet either one or both of the conditions it will be considered an unqualified withdrawal and you face an early withdrawal fee.  What this means for you is that if you have a Roth IRA, just because there is a lot of flexibility with withdrawals, try to let your account mature until you meet both conditions in order to get the most out of your Roth IRA.

Special Roth IRA Withdrawal Rules

  • There is a onetime $10,000 Roth IRA First Time Home Buyer tax and penalty free withdrawal permitted in order to help purchase a house.  It has to be the first time the owner has bought a house, but you can use it for a direct family member if you have already owned one.

By now you should understand the main Roth IRA withdrawal rules, use this information to see if a Roth IRA is right for you.