How Long Before You Can Withdrawal from Your Roth IRA
Roth IRA withdrawals, including some or all of the interest earned in the account will be subject to tax. There is also a loophole for early Roth IRA withdrawals know as the “72(t) exception”. Under current tax law, you can avoid the 10% penalty tax if you take “substantially equal periodic payments.” The Internal Revenue Service 1989 Cumulative Bulletin tells you how to calculate what it considers to be “substantially equal periodic payments”.
Penalties of Early Withdrawals
IRS Revenue Ruling 2002-62 adds additional details and clarifies some issues pertaining to Roth IRA withdrawal early. All of these engrossing volumes are very likely available at your local law library. To take a series of “substantially equal periodic payments” from your IRA without penalty, you must withdraw money at least once a year, and you must keep taking withdrawals for five years or until you reach age 59½, whichever is longer. So, a 35-year-old must take withdrawals for twenty-five years, while a 51-year-old must take them for eight-and-a-half years.
How old do you have to be before you can withdraw
A 57-year-old would have to take withdrawals for five years, until age 62. Also, you must let a minimum of 5 years plus 1 day elapse from the date of your first SEPP withdrawal before making “unlimited” withdrawals from your IRA, even if you’ve reached age 59 1/2. Otherwise, the IRS will hit you with the 10% penalty and retroactive interest charges. The amount of your withdrawal is calculated based on the balance of your retirement account on December 31 of the preceding year or any date in the current year prior to the first distribution using your age on December 31st of the year in which you make the withdrawal.
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