Making Roth IRA withdrawals for emergencies
Need to withdraw from your Roth IRA for emergency expenses? Choose wisely between withdrawing your contributions and your earnings―the IRS treats them differently in terms of taxes and penalties levied on withdrawals.
ALWAYS tax-free and penalty-free:
Withdrawals of your contributions
At any time―for any reason―you can withdraw the contributions you’ve made to your Roth IRA without incurring taxes or penalties.
If you have contributed to your Roth IRA by converting money from your Traditional IRA, you can withdraw your conversion contributions without tax or penalty if you are over 59½. If you are under 59½, you are eligible to withdraw your conversion contributions without tax or penalty, once they’ve met the required 5-year aging period in your Roth IRA.
SOMETIMES tax-free and penalty-free: Withdrawals of your earnings
Withdrawing your Roth IRA earnings without taxes or penalty is a bit more complicated.
You’ll need to fit 2 criteria:
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More than 5 years have passed since your first contribution
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You meet one of the following:
• You have reached age 59½
• You are making a qualified first-time home purchase (up to $10,000)
• You are disabled
Keep in mind: If you don’t meet the 2 criteria above, you can still withdraw your Roth IRA earnings―but they are subject to federal and state tax (and a possible 10% early withdrawal penalty, if you’re under age 59½).
The 10% early withdrawal penalty for those under 59½ may not apply if you qualify for an IRS-approved exception such as:
• A qualified first time home purchase (up to $10,000)
• Higher education expenses
• Medical expenses
• Disability
You can find the full list of exceptions at irs.gov in IRS Form 5329 or Publication 590-B.
Earnings from a Roth IRA can be withdrawn federally tax-free and penalty-free provided that it’s been 5 years since your first contribution.
In addition to the above conditions, one of the following criteria must be met in order to make penalty-free withdrawals from either IRA: age 59½, qualified higher education expenses, qualified first home purchases (up to $10,000), certain major medical expenses, certain long-term unemployment expenses, death, disability.