facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause
Roth IRA Withdrawal Rules Thumbnail

Roth IRA Withdrawal Rules

Investment Minimizing Taxes In Retirement

Before making a Roth IRA withdrawal, keep in mind the following rules to avoid a potential 10% early withdrawal penalty:

Age 59 ½ and under

You can withdraw contributions you made to your Roth IRA anytime, tax- and penalty-free. However, you may have to pay taxes and penalties on earnings/growth in your Roth IRA.

Withdrawals from a Roth IRA you've had less than five years.

If you take a distribution of Roth IRA earnings before you reach age 59½ and before the account is five years old, the earnings may be subject to taxes and penalties. You may be able to avoid penalties (but not taxes) in the following situations:

  • You use the withdrawal (up to a $10,000 lifetime maximum) to pay for a first-time home purchase.
  • You use the withdrawal to pay for qualified education expenses.
  • You use the withdrawal for certain emergency expenses.
  • You use the withdrawal for qualified expenses related to a birth or adoption.
  • You use the withdrawal to pay for unreimbursed medical expenses or health insurance if you're unemployed.
  • You become disabled or pass away.
  • You are a survivor of domestic abuse.
  • The distribution is made in connection with a federally qualified disaster.
  • The distribution is made due to an IRS levy.
  • The distribution is made in substantially equal periodic payments.

Withdrawals from a Roth IRA you've had more than five years.

If you're under age 59½ and your Roth IRA has been open five years or more, your earnings will not be subject to taxes if you meet one of the following conditions:

  • You use the withdrawal (up to a $10,000 lifetime maximum) to pay for a first-time home purchase.
  • You become disabled or pass away.

Age 59 ½ and over

Withdrawals from a Roth IRA you've had less than five years.

If you haven't met the five-year holding requirement, your earnings/growth will be subject to taxes but not penalties.

Withdrawals from a Roth IRA you've had more than five years.

If you've met the five-year holding requirement, you can withdraw money from a Roth IRA with no taxes or penalties.

Remember that unlike a Traditional IRA, with a Roth IRA there are no required minimum distributions.

You need a plan

Retiring - without a plan - is simply a plan to run out of money. Your NRECA R&S Pension is not a plan. Your NRECA 401k is not a plan. Your Social Security is not a plan. Those are only pieces in the retirement planning puzzle.

At 80/20 Financial Services we specialize in helping cooperative employees plan their retirement. We can show you how to turn your 401k and your R&S lump sum into a stream of income just like when you were working while also helping you achieve your desired financial outcomes in retirement. We help you retire with a plan, not just a portfolio.

A retirement planning consultation is free and without obligation. Contact us to set up a consultation.

For more articles about retirement planning and investing click here. 

Brian Coleman/Electric Cooperative Retirement Specialist

80/20 Financial Services is an Independent Registered Investment Advisory Firm. We help Electric Cooperative Employees create their retirement income and investment plans. We turn your NRECA 401k and R&S Pension into a plan that will provide you lifetime income and can change your family's legacy.

Photo created by Google Gemini