WHEN ARE WITHDRAWALS ALLOWED?
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Only qualified withdrawals of earnings are allowed from a Roth IRA. Qualified withdrawals are those that do not incur taxes. They are what make the Roth IRA attractive to many investors seeking to fund their retirements. Two criteria must be met for earnings to be qualified: the individual must be at least 59?, and the funds must have been in the account for at least five years. Withdrawals of contributions may be made anytime without tax or penalty.
The IRS considers any non-qualified withdrawal to be taxable income. All such withdrawals are subject to income tax on their earnings as well as the 10 percent penalty on early distributions. The 10 percent penalty tax does not, however, apply to the following situations:
? Disability or death
? A first-time home purchase up to $10,000
One is not required to take distributions from a Roth IRA during one?s lifetime.
Next we explore the regulations that apply to Roth IRA rollovers.