Tax free withdrawals
Contributions and earnings from ROTH IRA’s are NOT subject to taxes and penalties once the account holder reaches an age of 59 1/2 years old. The only requirement is that the ROTH IRA contributions are “seasoned,” which means that the money has to have been in your Roth IRA for 5 years from January 1 of the year you made your first contribution.
Roth IRA contributions may be withdrawn at any time without taxes or penalties.
Taxable withdrawals
Roth IRA earnings are subject to income tax and penalties if withdrawn before the age of 59 1/2 and the account hasn’t been “seasoned” for 5 years.
Exceptions to the ROTH IRA rules
Withdrawals from a ROTH IRA before the age of 59 1/2 are not subject to taxes or penalties in the following situations, as long as the ROTH IRA is seasoned for 5 years:
- Death
- Disability
- First time home purchase – Up to $10,000 lifetime maximum
Other Early Distributions
Distributions from ROTH IRA’s are taxable but not subject to penalties in the following situations, as long as the distributions are used for:
- qualified higher education expenses*
- medical insurance premiums after losing your job
- significant unreimbursed medical expenses
- buying or rebuilding a first home
- distributions as part of a series of substantially equal payments
*Withdrawal amount must not exceed education expenses.
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