You are free to make withdrawals at anytime from your Roth IRA. But only qualified distributions receive tax free treatment. Tax free treatment means it isn’t subject to federal and state taxation nor the 10% premature distribution tax.
A withdrawal from your IRA is qualified if :
1) It is made at least 5 years after you’ve established any Roth IRA
2) Plus any one of the following:
- you’ve reached age 59 1/2 by time of withdrawal
- your withdrawal is made because of a qualifying disability
- you’re using it for first time home buyer expenses ($10,000 lifetime limit)
- the withdrawal is made by your beneficiary or a state after the time of your death
The 5 year holding period begins January 1st of the tax year in which you make your first contribution, regardless of whether it’s regular or a rollover Roth IRA. Therefore, it is highly advisable to setup a Roth IRA as soon as possible, even if you can only afford a minimum contribution. So, the earlier you set up your Roth IRA, the earlier you’ll be able to receive tax free, qualified distributions from the Roth IRA.
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