Terms and Conditions of a Roth IRA Withdrawal

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Retirement accounts with tax benefits often let you save money on a pretax basis to delay income taxes until retirement. A Roth IRA is a special type of individual retirement account that does not allow pretax or tax-deductible contributions, but offers tax-free withdrawals if you meet certain requirements. Rules for Roth IRAs also differ from other types of retirement accounts when it comes to early and required withdrawals.

Roth IRA Withdrawal Basics

When you save money in a Roth IRA, the investments in your account grow tax-deferred, which means you don't pay tax on earnings, such as interest, dividends or capital gains. You can withdraw your investment gains tax-free after age 59 1/2, as long as you wait five years to tap into your funds after opening your account and making the first contribution to it. You can take out your original contributions at any time tax-free, but you have to pay tax on withdrawals of investment gains if you don't meet the age and account holding period requirements.

Early Distributions

The government allows IRAs to help people save money for retirement, and it has rules in place to discourage investors from taking funds out of an IRA before retirement. A withdrawal from a Roth IRA made before you reach age 59 1/2 is considered an early distribution. Investment gains you withdraw early are subject to a 10-percent tax penalty in addition to the normal income taxes that apply.

Special Cases

The 10-percent tax penalty on early withdrawals of investment gains can be waived in certain special cases. You may be exempt from the early withdrawal penalty if you are disabled, are the beneficiary of a deceased IRA owner, pay for health insurance while unemployed, or have medical expenses that are not reimbursed by an employer. You can also withdraw up to $10,000 to buy or build a first home penalty-free.

Required Minimum Distributions

Retirement accounts like traditional IRAs and 401(k) plans that let you save money on a pretax basis are typically subject to "required minimum distributions" that force you to start tapping into your money starting at age 70 1/2. Roth IRA owners do not have to make required distributions, so you can keep you money in your account as long as you wish. In fact, you can keep putting money into your Roth IRA even after age 70 1/2.