Ira Comparison

Roth IRA Withdrawals | Don't Get Panalized

Who likes paying fees? I do not assume that anyone enjoys being hit up with fees whenever they are accessing their money. However, there are fees everywhere you turn. Close your bank account early, pay the fee. Take money out of a rival bank’s ATM, pay a fee. Roth IRA withdrawals - you got it, pay a fee! Withdrawing from Roth IRA accounts can become a headache pretty quickly if you are not prepared to bang your head against the wall a few times. The IRS keeps a close and watchful eye on the different IRA accounts that people have and how they distribute their money between them. Unless you have an exception (some are listed later on) you will most likely have to pay what is known as an early withdrawal penalty, which ends up being 10% of your total withdrawal. Now this doesn’t matter if you are withdrawing the money for quick cash or distributing/ converting the money into another IRA account you already have, 10% fees will usually hit you. Let’s look at some of the exceptions that may help you avoid penalties on Roth IRA withdrawals:

• If the money withdrawn is used to pay medical expenses. Now this can only work if the medical expenses go over 7.5% of your gross yearly income. If the expenses come to under that 7.5% then you are on your own, insurance or no insurance.
• If the money withdrawn is to help with a severe disability that the account owner has. Check with your accountant or the IRS to see what ‘severe disability’ means because they are very tight on this clause.
• If the money withdrawn is used to purchase a first home. Now you cannot use the money to buy your fourth, fifth or sixth homes you can only use it on your first home purchase and the amount cannot exceed $10,000.
• If the money withdrawn is used to pay educational costs for the account holder or his family (mainly college tuition costs).
• If the money withdrawn is used to pay back taxes that the IRS is requesting, and has put a hold on your IRA.