Roth Ira Withdrawal Rules

If you are thinking of windrowing the money you have in your Roth IRA account, then you should know that there are certain rules that you have to follow before you can take the money out of your account.

When you contribute with money to your Roth IRA account, the amount with which you contribute is taxed. That means that, when you want to withdraw money from your retirement account, you won't have to pay any taxes or fees. Still, there are some withdraws that do not "qualify" and may be the subject of taxes or penalties. That is why you have to be very careful when and why you withdraw the money from your Roth IRA account. There some basic rules that you need to follow in order to make sure that you aren't being taxed for the distributions, and they are pretty simple.

Even though you can withdraw your contributions out at any time and for any reason from your Roth IRA account, thus making it very flexible and convenient, in order to get the earnings out of your IRA account, without having to pay taxes or penalties, you will have to follow certain "qualified distribution" rules. A qualified distribution is a withdrawal that is made 5 years after you open the account, or is made after you reach the age on 59 1/2, or by a beneficiary after your death, or because you are disabled, or you meet the first time home buyer exception. All withdraws that meet these requirements will not be the subject of any taxes or fees. However, if your distribution is not considered as being qualified, you may have to pay up to 10% penalty on the amount withdrawn.

If you are a first time home buyer, than you can take up to $10000 from your account, without any penalties, in order to purchase your first home for you and your family. Also, if you are planning to use the withdrawal in order to pay for unreimbursed medical expenses, or if you are handicapped and you must pay someone to take care of you, then the amount you withdraw from your Roth IRA account will not be taxed. Moreover, if you are using the distributions to pay for higher education expenses, the withdrawal will take place penalty free. These are the main exceptions, though there a few others.

When you withdraw the money from your IRA account, the regular contributions are withdrawn first, this way you can take out the money with which you contributed to your retirement account, tax free, at any time. The earnings come last and they are the subject of 10% early withdraw penalties. So, before you decide to take money out of your Roth IRA retirement account, make sure that you won't be taxed and that you meet the qualified distribution rules.

Roth IRAs are a great way to save money for your retirement while investing them and unlocking their full potential. Just make sure you follow all the rules in order to obtain maximum profit.