When You Can Withdraw From a Roth IRA With No Penalty

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A Roth IRA is a great way to prepare for your future. Roth IRAs are individual retirement accounts that you can usually tap into without any fees after you’re 59 1/2 years old. Unlike other IRAs, you contribute after-tax dollars to Roths. That means the money is also tax-free when you withdraw it.

You can withdraw your own contributions at any time, given you’ve owned the account for at least five years.  When you withdraw earnings from your account before 59 1/2, however, you’ll usually need to pay a 10 percent withdrawal fee and income tax.

There are certain circumstances that allow you to tap into your Roth IRA before you’re 59 1/2 without fees. The rules are a bit complicated, though, so here’s how things work.

Withdrawing from a Roth IRA Before 59 1/2

To withdraw from a Roth IRA without penalty before you’re at retirement age, you need a “qualifying reason.” If you don’t qualify, you’ll be hit with the 10 percent withdrawal fee. If you’ve owned the account for less than five years, you can withdraw without penalty to:

  • Buy your first home (withdrawal up to $10,000)
  • Have or adopt a child (up to $5,000)
  • Cover health insurance costs while unemployed
  • Pay for medical expenses costing more than 7.5 percent of your income that year
  • Cover some costs of a disability
  • Give funds to a beneficiary after your death
  • Pay for qualified education costs

You can also agree to withdraw your money as “substantially equal periodic payments,” annual withdrawals of the same amount until you turn 59 1/2. All of these withdrawals would damage your retirement fund, but with different perks as well. Your Roth IRA is obviously designed to help you after 60, but you can use it to safely save money for home and childcare expenses too.

If you’ve owned the account for more than five years, the list of qualified reasons is cut to:

  • First time home buying
  • Disability Costs
  • Disbursement to a beneficiary after your death

Once you get past the magical age of 59 1/2, you’re free to withdraw from your Roth IRA with no penalties.

However, it’s worth noting that until you hold the account for five years, any earnings you withdraw will be taxed.

The Bottom Line

Most financial experts recommend only dipping into your retirement fund in case of an emergency. However, the unique fee-free withdrawal options of a Roth IRA allow you some flexibility in accessing your savings. Click To Tweet

Using a portion of your IRA to cover part of the cost of your first home or child can make a lot of sense, and save you from completely depleting your spending money while giving yourself enough time to rebuild your savings. While you should always weigh the costs and benefits of taking money from your retirement fund, there’s a reason you’re allowed to take the money out without a fee at certain times.

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