IRA Withdrawals

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Hi,

I have been checking the rules for IRA withdrawals. So far, my understanding is that you can withdraw from a traditional IRA , and pay tax but no penalty, if you are over 59.5 years. How long the money has been in the IRA has no bearing on this.

Likewise, with a Roth, you can withdraw money, tax and penalty free, if you are 59.5 yo, OR have had the account open for five years.

Is this accurate?

Thanks for any help.

Mikey

Hi Mikey,

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Quote:

Likewise, with a Roth, you can withdraw money, tax and penalty free, if you are 59.5 yo, OR have had the account open for five years.

As I read this it is AND not OR, but I could be wrong.

http://www.fool.com/money/allaboutir...boutiras06.htm

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Quote:

As I read this it is AND not OR, but I could be wrong.

Hi Cut-Throat,

I read your link, and it seems that you definitely are right about this 5 year requirement. Maybe I am missing something, but to me it seems that this makes the Roth pretty cumbersome as one approaches retirement. It could be a real trip to segregate what earnings applied to what contributions.

I think it could be best to use this account only till you are about 55, then stop contributing. What an unnecessary complication!

Thanks for the heads -up.

Mikey

If you read thru the 3rd example in the above link it discribes how you do not have a 5 year wait on contributions. I believe the 5 year wait only applies to conversions.

As far as bookkeeping not much is required, distributuions are assumed to come out in the following order:

1) Regular contribution amount
2) Converted amount
3) Gains

There should be no reason to stop contributing to a ROTH up until you retire (stop having an income).

Check out www.rothira.com for more details.

[Ted]

A particularly attractive feature about a Roth IRA is that a person may withdraw the amount that they contributed to it (but not the increase in value) at any time without taxes or penalties. This is particularly advantageous for younger people, who can put money in a Roth IRA knowing that they can withdraw most of it for emergency use -- for example, for spending needs if they become unemployed.

(The exception is that the money can't be withdrawn for 5 years if it was rolled over from a regular IRA.)