How to make Roth IRA Withdrawals

Let's go back to the primary question. Why Roth? Isn't it because you expect all Roth IRA withdrawals to be TAX-FREE?

Don't worry. Your obligations are not as heavy as you think. And you're already given much freedom for your money. Your Roth IRA contributions can be withdrawn AT ANY TIME, free of taxes and penalties for early withdrawals. In addition, you can withdraw earnings tax free if you have qualifying reasons for the distribution.

Qualified Distributions

To be qualified Roth IRA distributions, the withdrawals must meet the criteria below.

1. 5-Year Rule: The distribution must occur at least 5 years after the beginning of the year in which you first set up and contributed. For example, if you open a Roth account in December, 2009, the 5-Year Rule will be satisfied as of January 1, 2014.

2. The distribution occurs:

• On or after the date you reach age 59 1/2,
• Due to your disability,
• After your death (Paid to your beneficiaries or estate), or
• To pay for qualified first-time homebuyer expenses (up to a $10,000 lifetime limit).

Otherwise, any portion of withdrawals of earnings may be subject to ordinary income taxes and possibly an additional 10% Roth IRA early withdrawal penalty.