What Are the Different Roth IRA Withdrawal Rules?

There are various Roth individual retirement account (IRA) withdrawal rules a person should consider. For example, some rules apply to the situations in which a person can take a distribution payout without paying penalties, and others focus on exceptions to these rules. There are also rules regarding the number of years a person has to have a Roth IRA before taking a distribution. Roth IRA withdrawal rules also cover whether or not an individual will still have to pay taxes on his money if he has an exception that frees him from paying penalties.

One of the most well-known Roth IRA withdrawal rules involves when a person can take distributions. To qualify for a distribution, a person usually has to reach 59 and a half years of age or be disabled. In some cases, however, a person will also qualify for a distribution if he needs the money for certain expenses, such as for buying a first home. In the event an individual does not qualify for a distribution, this doesn't mean he cannot access the funds he needs. Instead, it usually means he will have to pay taxes and penalties on the money.

Another one of the most well-known Roth IRA withdrawal rules is the five-year rule. Based on this rule, a person must have his Roth IRA for five years before taking an earnings distribution. If he receives a distribution before these five years have passed, the account holder is typically subject to taxes on the income he receives. In figuring out how this rule is applied, a person can focus on the first day of year five after establishing his IRA. For example, if a person establishes a Roth IRA on June 1, 2013, he will satisfy the five-year rule on January 1, 2018.

Some Roth Ira withdrawal rules involve exceptions to the guidelines for withdrawing money. For example, a person can avoid the 10-percent penalty on an early withdrawal if he needs the money for medical expenses that account for more than 7.5 percent of his gross income or to pay for medical insurance after losing a job. He might also avoid the penalty if he has certain higher education expenses that are more than the amount of the distribution or if he's withdrawing money as part of a qualified recovery assistance program.

When a person is considering Roth IRA withdrawal rules and penalty exceptions, it is important to understand that release from penalties may not translate into freedom from paying taxes on the money he withdraws. In many cases, he will still have to pay taxes on a distribution. Additionally, a person may find it helpful to keep in mind that the Internal Revenue Service, a federal tax agency in the United States, combines all of a person’s Roth IRAs when determining whether or not he meets withdrawal rules. For instance, once a person has met the five-year rule for one of his Roth IRAs, he is considered to have met them for all of his Roth IRAs.