Nice-Biz Article Archive

Roth IRAs are governed by the IRS; as such there're a lot of Roth IRA withdrawal rules that should be followed before you take money from your account.

In this article we will discuss Roth IRA distributions; when they could be taken, when and if they are taxable, when and if penalties might apply, and any exceptions to the Roth IRA withdrawal rules.

Normally, distributions that are considered "qualified" and distributions that represent contributions you made to the Roth IRA aren't taxable. Additionally, Roth IRA funds that are transferred from an account to another (Roth IRA ), are also not taxable.

However, Roth IRA withdrawals that are not "qualified" or is not a return of your original contributions might be subject to taxes and/or penalties.

Roth IRA Contributions Could Be Withdrawn Tax Free at Anytime

Let's talk about return of contributions first. What this means is that you could get the contributions made to your Roth IRA out at anytime, for any reason, without taxes or penalties. Most people are unaware of this rule, and it's a critical one. The ability to get your contributions out tax and penalty free makes the Roth IRA a very convenient investment vehicle.

The ability to get your contributions out at anytime means you can use your Roth IRA as an emergency fund, to save for college costs, or for any financial objective. Let's hope Congress doesn't ever change this rule!

Qualified Distribution Rules for Taking Earnings Out of a Roth IRA

While you're able to get your contributions out at any time without worrying about paying taxes and/or fines, this isn't true for the earnings on your contributions. To get the earnings from your Roth IRA without paying taxes or penalties, you should follow the "qualified distribution" rules.

So what is a qualified Roth IRA distribution? According to the IRS, a qualified distribution is a Roth IRA withdrawal that:

1. Is made five years after the Roth IRA is setup and contributed to, or

2. Is made:

- When you reach age 59 1/2,
- Since you are disabled,
- To a beneficiary (or your estate) after death, or
- Meets the first time home buyer exception (more information later)

Any withdrawals that meet the requirements above will not be subject to income taxes. However, if you take a distribution that is not considered a qualified distribution, you might have to pay a 10% penalty on the amount withdrawn.

Exceptions to Early Withdrawal Penalty

If you take a withdrawal from a Roth IRA that does not represent your original contributions, or isn't a "qualified" distribution as defined earlier, then you might be subject to a 10% penalty (the IRS calls this additional tax). Thankfully, there are several exceptions to the 10% early withdrawal penalty.

Following are some situations in which the 10% early withdrawal penalty may not apply:

- You're age 59 1/2 or older,

- You're disabled,

- You qualify as a first time home buyer (distributions of up to $10,000 could be taken penalty free to be used towards the purchase of your first home),

- The distributions are a part of a series of substantially equal payments (i.e., these payments must generally last for five years or until you reach age 59 1/2, whichever is longer),

- You are using the withdrawal to pay for huge un-reimbursed medical expenses, or

- The distribution is being used to pay qualified higher education expenses.

There're some other exceptions, but these are the main ones.

The Tips On How To Submit An Application For Social Security Benefits
Social Security was originally created to provide retirement benefits to workers, but the program has grown tremendously and now Social Security provides disability benefits, death benefits and other family benefits in addition to retirement benefits.

How Are Social Security Benefits Calculated? Several Things & Issues Affecting The Benefits
One of the most popular Social Security questions that I hear from baby boomers getting ready to retire is "how are Social Security benefits calculated?" This is an important question because it could affect how long you need to work, whether you should continue to work during your retirement years

Social Security Income: Tips To Help You Get The Most Out Of Your Social Security Retirement Income
As you get closer to retirement, choosing when to take your Social Security may seem like rolling the dice. There are so many decisions to make, such as:

3 Reasons To Use A Fee-Only Financial Specialists
There are three different types of financial advisors: the commission broker who sells a product for a commission, the fee-based advisor who provides investment management for a percentage of the assets invested, and the fee only financial planner who provides a comprehensive financial plan for an hourly fee.

Spousal Benefits: Applying For Social Security Benefits
Can a spouse collect on her husband's social security if she reaches retirement age before her husband? No. In order for a wife to collect Social Security benefits on her husband's earnings the following requirements must be met:

3 Ways A Financial Planner Could Help You Reach Your Financial Goals And Objectives
Many people wonder exactly what a financial planner does, and how they can help you. Here are just three ways a financial planner can help you achieve your financial dreams and goals.

Completely New Guidelines Mean Much More Men And Women Doing Roth IRA Conversions In 2010
As we near the end of 2010, countless people have already done Roth IRA conversions, and many others are questioning if a Roth IRA conversion in 2010 is the right move for them.

How Could Payday Loans Help.
Have you ever found yourself in an emergency situation? Do you require a substantial amount of money fast but don't know where to get it? Payday loans may be just the thing you need.

Gold Coin Prices Guide May Give Valuable Information To Invest At Right Time
Coin collecting, there are tools that you'll need to acquire to make your numismatic experience both fun and rewarding. The most valuable tool that you can get your hands on is an up-to-date gold coin price guide. Inside you will find great information to help you enjoy your new hobby