Is it possible to make withdrawal from Roth IRA without penalty?  The Roth Individual Retirement Arrangement has two basic criteria in order for the account holder to get his full contribution plus the investment gains. The first one is that the plan holder must reach the age of 59 ½ . The second one is that accounts must be active within five years prior to the withdrawal. Early withdrawals made prior to the required age will have  10 % penalty. In order to avoid huge slash on your money, it is important to be informed about the rules and provisions of Internal Revenue Services.

Let’s take one step at a time. We all know that an individual who have not yet reached the required age of 59 ½ and wish to get most contributions on his Roth IRA will have 10% penalty on the amount withdrawn.  There are actually ways in which an individual can avoid this penalty. One can still actually gain access to the money. But he just has to make sure that withdrawals made should not be more than the amount that he has contributed. Let’s say for example, the account holder invested $10,000 on his Roth IRA. After a year, he had to withdraw the same amount for emergency reasons. The amount he invested already grew into $10,200. If he takes the full amount, then this is subject to 10% tax penalty. But if he will take only the original amount he placed on his investment, then there’s no need to pay for fees.

Of course, early withdrawals happen if the account holder observes the 5-year rule. This is about keeping the account active for five years.  This the second criteria that should be met.

The investment gains in the Roth IRA are taxable that’s why it is quite important for the holders to remember all the rules being applied on it. At times, maintaining one’s account also depends on the kind of company holding or maintaining your Roth IRA. If they have high maintenance fees, then one is likely to get  less from his investment. Some companies also collect penalties for early withdrawals.

Discussing one’s withdrawal from Roth IRA without penalty with a financial planner is a wise move. He could help you out on how to maximize the investment gains and when is the best time to collect. He also has the comprehensive IRS rules which may also deferred penalties and even avoid going against the law.

This entry was posted on Wednesday, December 7th, 2011 at 10:06 pm and is filed under early withdrawal from ira. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.