Penalty for liquidating ira account
Penalty for liquidating ira account - dating a roughneck
Since an Individual Retirement Account (IRA) is a long-term investment vehicle, protected by taxation and Internal Revenue Service (IRS) penalties for early withdrawal, it can often feel as though your money is out of reach, particularly for younger investors.
And a Roth IRA is, without a doubt, the most limber of your retirement savings options.
Generally speaking, it’s best to leave your retirement account untouched so that you can maximize your returns.
But for unforeseen expenses, it can be a lifesaver.
And, if you’re planning to buy your first house, a Roth can be a great part of a disciplined plan to save for the down-payment.
That’s because a Roth allows for early withdrawals-- income tax- and penalty-free -- for things like supporting yourself after a disability or buying a first home.
And because your contributions are always made after you pay income taxes, you can withdraw -free and penalty free before retirement without having to fork over cash for taxes or penalties.
(But once your withdrawals exceed the amount of your original contributions, that money is considered “earnings” and are subject to possible penalties and taxes).
Some other types of withdrawals require you to pay income tax on the earnings but not a penalty (currently 10 percent of withdrawn earnings).
To withdraw earnings without paying taxes or penalties, you must follow the rules.
The first requirement is that the withdrawal must be taken five years or more after the account is open.
The IRS counts the five years from the first day of the tax year in which you make your first Roth contribution. 1, 2012, the IRS actually starts the clock at the beginning of the tax year, that is, Jan.
1, 2012 (and when the IRS gives you a gift like that, you take it).