There is no shortage of concerns when it comes to investing for retirement. Will I be able to grow my capital effectively? What will my tax situation be when I retire? Do I have to wait 5 years to withdrawal from my Roth IRA? Can my children benefit from my investments if I pass away while the account is still open?
Fortunately for Roth IRA investors, this retirement vehicle makes accessing your funds relatively easy. With Roth IRAs available through high-quality, low-cost online brokerages such as industry leader ETrade, you can effectively invest in this type or individual retirement account at a comparatively lower price.
Do I Have To Wait 5 Years To Withdrawal From My Roth IRA? Yes And No
Smart investors know that life is full of surprises, and access to capital can be a critical factor when choosing retirement accounts. Many retirement investors want to know, “do I have to wait 5 years to withdrawal from my Roth IRA?”
A major benefit to investing in Roth IRAs is that your contributions – original investments – can be withdrawn at any time, tax-free. This is an attractive feature if you find yourself in immediate need of your capital.
Investment earnings can be withdrawn tax-free, provided they fall under the IRS rules for “qualified distributions”. In order for a withdrawal to be considered a “qualified distribution” you must have owned the Roth IRA for at least five years (the “seasoning” period) as well as meet additional requirements.
Roth IRA Penalties And Fees
Withdrawals may be subject to a 10% penalty as well as ordinary income tax if they do not meet the requirements of a “qualified distribution”. Some additional IRS requirements for tax-free Roth IRA withdrawals are: you have reached the age of 59½, you have become disabled, or you are the beneficiary of a Roth IRA owner who has passed away.
Do I have to wait 5 years to withdrawal money from my Roth IRA? You are required to hold converted funds for a minimum of five years in your Roth IRA, or you may be subject to an additional 10% IRS penalty on any earnings as well as a portion of the withdrawal.
You may be able to avoid this penalty by meeting additional requirements, so it is always wise to consult with a tax professional prior to withdrawing any funds.
Traditional IRAs Versus Roth IRAs
In contrast to a traditional IRA, a Roth IRA does not require minimum distributions after the age of 70½, making a Roth IRA an excellent investment for planning your withdrawal strategy. If you have invested in a Roth IRA in addition to a 401k or a traditional IRA, you can receive distributions from your IRA and 401k first, and withdrawal funds from your Roth account later.
Whether you are looking to rollover a traditional IRA into a Roth IRA, or open a brand new Roth IRA, online brokerage ETrade makes it easy to invest for retirement in a tax-advantaged account. You can also open a Roth IRA at a full-service brokerage, bank or credit union.