Investing in your retirement is a fair reward after working years of your life, and it starts with opening retirement accounts. Nearly 13 million people in the United States have Roth IRA accounts to save money for a secure and stress-free retirement.
After reaching retirement age, it’s natural to want to put money in your pocket and remove it from your retirement account. Understanding the fine print of your Roth IRA is critical when preparing to remove money from your savings.
The wrong move could take money out of your hands, but luckily, you’ve come to the right place to learn the IRA rules. Continue reading to learn the steps to remove money from your retirement accounts today!
When Can You Withdraw from Roth IRA Accounts?
The first rule to know is the age at which you can withdraw from your Roth IRA without facing penalties. Roth IRA withdrawal policies are complex, but a simple rule is to avoid putting money in your pocket until you’re 59 1/2 years old. Your account must also be five years old before withdrawing.
Taking money out early will result in penalties that cost money from your retirement savings. You can avoid the 10 percent penalty by waiting or ensuring you fit one of the exceptions for early withdrawal.
Roth IRA Withdrawal Exceptions
If you’re set on using a Roth IRA to build savings for retirement, it’s beneficial to understand the rules and exceptions that apply to your situation. You’ll get more from the money you’ve put away to save for retirement.
It’s worth noting that meeting the withdrawal exceptions protects your finances from the 10 percent penalty, but you’ll need to pay taxes on the money you take out. Still, you can avoid the penalty by withdrawing up to $10,000 to buy your first home.
Another exception is a life event like adoption or the birth of your first child, which allows you to put $5,000 of your savings into your pocket. Ambitions to further your education are an additional exception, allowing you to take money from your Roth IRA.
Roth IRAs can also be used to cover misfortune in your life. You can use your retirement money to cover insurance premiums if you’re laid off. It’s also wise to use your retirement accounts to cover your living expenses if you’re injured and face disability.
Your retirement savings can cover financial issues related to the IRS. An IRS levy is an exception to the IRA withdrawal rules. Consider the rules and the consequences to determine if it’s worth putting money in your pocket.
Put Money in Your Pocket Today
Retirement accounts are fantastic tools to help you save for retirement through compound interest, but knowing how to put money in your pocket in emergencies is vital. Avoid taking money out of your Roth IRA unless you’re over 59 1/2 years old or you meet the exceptions to the Roth IRA rules. Early withdrawals will cost you a 10 percent penalty and taxes.
Your golden years are within reach, and saving money will put you on the fast track toward retirement. Read our Lifestyle content to discover tips and tricks for living your best life today!