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Getting Money Out Of An IRA

Tax Aspects Of Withdrawals From A Roth IRA

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Withdrawals do not have to be in cash. You can withdraw securities rather than cash from your IRA. Note: as you'll see in the next section, there are times when withdrawals have to be made.

If you are older than age 59 1/2 on December 31st of the year you take the distribution, you will not have to pay any tax on either the amount you invested or the amount earned in the account as long as you had the plan for at least five years. The five-year period is measured from January 1st of the year for which the IRA was started. So,  if you start an IRA in early April, 2010 (for the year 2009), you will be able to access the funds without paying any income taxes as early as January, 2014.

If you did not have the plan for at least five years, then you will have to pay tax on any amounts withdrawn that exceed what you put into the plan.

If you withdraw money before age 59 1/2, you will not have to pay income taxes on any of the proceeds if both of the following apply:

  • You are disabled or making a first time home purchase. 
  • You have had the IRA for at least five years. The five-year period is measured from January 1st of the year for which the IRA was started. So even if you start an IRA in early April 2010 (for the year 2009), you will be able to access the funds without paying any income taxes as early as January, 2014.

If you withdraw money from your Roth IRA before you've had it for five years, the earnings in the plan will be taxable. The IRS will count your withdrawals as first coming from your contributions and then from your earnings. This means that you can withdraw money tax-free at any time from a ROTH IRA up to amount you contributed.


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