A:

The penalty for early withdrawal of Roth IRA earnings is 10% of the distribution amount. There is no penalty for withdrawing Roth IRA contributions, only earnings. A withdrawal is considered early if made before the contributor reaches age 59.5. Penalties are not to be confused with ordinary income tax applied to non-qualified distributions. Penalties are charged in addition to this tax.

Penalty-Free Withdrawals

At any time, you may withdraw contributions from your Roth IRA both tax- and penalty-free. If you use the withdrawal to purchase your first home, the money is penalty-free. This applies to a maximum of $10,000, and the money must be used within 120 days. Also penalty-free are withdrawals made to pay for qualified educational expenses. The withdrawal amount must be less than or equal to your annual expenditures for room, board, tuition, books and other higher education-related expenses.

Your withdrawal amount is also penalty-free if you use it to pay for medical expenses during unemployment or to provide income for your family if you become disabled or die. Also, withdrawal penalties do not apply if you arrange to have the money periodically distributed to you in equal amounts. If you withdraw from your Roth IRA for any of these reasons before it has been open for at least five years, taxes still apply. If the Roth IRA has been open for at least five years, both withdrawal penalties and taxes are waived. The government begins calculating the age of your Roth IRA on the first day of the fiscal year in which you made your first contribution.

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