Roth IRA Withdrawal Rules
Usually the Roth IRA withdrawal rules remain the same from year to year, however be aware that they are reviewed by the federal government on a yearly basis and they are subject to change. If you have a Roth IRA then it is your responsibility to keep informed of any changes that are made to the withdrawal rules.
As of 2010 the Roth IRA Withdrawal rules for qualifying Roth IRA withdrawal are as follows:
Withdrawals from an IRA may begin tax and penalty free when you reach the age of 59 ½ years. However that doesn’t mean that you have to wait until that age to make a withdrawal. Any money that you have contributed is always available tax and penalty free because the Roth IRA is funded with money that you’ve already paid tax on. However, any earnings on the contributions are subject to tax, plus a 10% penalty if you withdraw early. There are several circumstances in which the 10% penalty is currently waived.
If you are disabled, a new home buyer or using the money for higher education you may be exempt from the Roth IRA qualifications withdrawal penalty. Under the 2010 Roth IRA withdrawal rules you may withdraw up to $10,000 for the purchase of your first home. And you may withdraw any amount for higher education as long as the expense is considered qualified by the IRS. They have a pretty broad definition of qualified expenses, including tuition, books, fees and supplies.
The big downside to taking an early withdrawal from your IRA is that you have now lost the future growth potential of that money. Even if you have additional liquid funds later in life, you are capped on the amount you can contribute to a Roth IRA each year, so you will never catch up on the money you’ve withdrawn. So, unless you have no other resources it makes the best financial sense to keep any Roth IRS withdrawal to a minimum until you are retired.
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