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Do you have money invested in a Roth IRA (or several)?
That’s great… but be careful!
Don’t believe that you can withdraw money any time you want from a Roth IRA without serious tax consequences.
Here’s the story.
“Qualified” withdrawals versus
“Non-qualified” withdrawals.
Qualified Withdrawals:
Yes. Any withdrawal from any of your Roth IRA accounts is income tax free. (Some withdrawals are also state income tax free.)
But to qualify for this tax-free status, your withdrawals have to be “qualified.”
To be considered qualified, you have to meet two requirements.
- You have to be 59 ½ or older
- You have to have at least one Roth IRA open for over five years
If you pass these two tests you’re home free. Withdraw away!
Non-qualified Withdrawals:
If you withdraw money from any Roth IRA, and don’t meet the two requirements listed above, things can get really sticky.
For example, if you’re younger than 59 ½ years old, your non-qualified withdrawal can cause you big problems.
Here are the real kickers:
- Non-qualified withdrawals are taxed as ordinary income.
- You’re subject to a 10% early-withdrawal penalty tax!
The moral of the story?
Don’t assume that you can pull money out of your Roth IRAs any time you like with Uncle Sam’s blessing.
Unqualified withdrawals can turn the old guy nasty!
So… before you wind up losing money, get the whole story…