Though IRA accounts are used to save up for retirement, there are some instances that need immediate financial attention that may force you to withdraw from your Roth IRA account. It is important that before you withdraw from your Roth IRA, you should be aware of the IRA withdrawal rules for Roth IRA account. By knowing these IRA withdrawal rules you will be able to effectively decide whether to withdraw your funds or not.
The IRA rules on withdrawals for Roth IRA accounts allow account holders to withdraw their contributions anytime tax-free. The contributions made to a Roth IRA account are non-tax deductible. This means that you pay the taxes upfront. And because you are only required taxes once for all types of IRA accounts, you get to withdraw your principal contributions absolutely tax-free.
Withdrawal of contributions from your Roth IRA account is pretty simple. However, the IRA rules for withdrawal of earnings may be a bit complicated. Earnings should be withdrawn after the account holder reaches 59 ½ and should have satisfied the five-year rule. These are the two main requirements for withdrawal of earnings. The five-year rule is satisfied on the first day of the fifth year since you open your IRA account. This means that if you open your Roth IRA account on October 1, 201, the five-year rule will be satisfied on January 1, 2015.
However some exemptions allow account holders to cash out their Roth IRA earnings early. This includes first time home buyers, account holders who have incurred a disability and those deceased account holders. Qualified first time home buyers are not exactly persons that are planning to buy a house for the first time but also include those who have bought their first home within two years. First time home buyers can withdraw as much as $10,000 for single IRA accounts and $20,000 for joint IRA accounts. Aside from the mentioned conditions, any withdrawals will be treated as an early distribution and will be subjected to penalties and taxes. Sometimes the penalties and taxes could eat up a significant amount of your earnings. Hopefully by knowing the withdrawal rules of Roth IRA accounts you will be able to make wiser decisions regarding your finances