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Roth IRA Early Withdrawal Rules



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today I'm gonna talk about the Roth IRA

early withdrawal rules so we're gonna

talk about the first time homebuyer

college and everything else there's your

first time at our channel or you haven't

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at the bottom my name is Travis sickles

certified financial planner with sick

alone or financial advisors so let's

start right at the beginning and go

through what a Roth IRA is you get a

paycheck the taxes come out of that

paycheck and what you're left with or

after tax dollars those dollars the ones

you've got from your paycheck they can

go directly into the Roth IRA now the

big benefit of the Roth IRA is that the

growth so you're going to invest these

dollars and hopefully they'll grow over

time that growth will come out tax-free

so that's a huge benefit but that

benefit is realized in retirement but

what if you need to get to the money

earlier or before age 59 and a half or

are there any loopholes or tax codes

that we can look at to get this money

out a little bit sooner well there is

when you're looking at the Roth IRA

there are two components there are the

contributions or what you put into the

Roth IRA and the growth or the gains now

the contributions that you put into a

Roth IRA you can pull those out at any

time you can pull them out the next day

that you put them in a week later a

month three years down the road it

doesn't matter you can pull those

contributions out at any point without

any taxes or penalties it's really the

growth portion that we look at when

we're looking at to see if there are any

taxes or penalties that we might incur

so the first way we're going to talk

about then you can get access to your

Roth IRA dollars early the growth

portion is looking at if you're a first

time homebuyer so if this is in fact

your first home purchase you can take up

to ten thousand dollars out of the Roth

IRA and apply it for the down payment

now that $10,000 includes growth so you

can pull both the contributions and the

growth out before age fifty nine and a

half but there is a caveat you have to

have the Roth IRA open for at least five

years so this is a huge

because you're not paying taxes on any

of the gains and you're not even in

retirement yet so that's a huge benefit

so with the first time homebuyer it's

$10,000 or less and you have to wait the

five years now if you don't want to wait

two five years then you can always just

stick to the contributions that you put

into the Roth IRA but if you want to

pull out all of it you have to wait that

five years you can also use the Roth IRA

for college savings you can pull out

both the contributions and the earnings

again with the five year rule if you

wait five years you can pull out as much

as you want for college expenses but

they have to be qualifying college

expenses you can't just pull the money

out and not document where that money is

going it has to go for the qualified

expense now if it's for college and you

haven't met the five-year rule yet then

you could take out earnings and

contributions and just avoid the 10%

early withdrawal penalty on those gains

you're still gonna pay ordinary income

tax on the gains for college if it's

before the five years but again

contributions whatever you put into it

it's already been taxed so you can pull

it out tax-free now for college if you

wait the full five years then you can

pull out as much as you want for college

education expenses only what's also nice

about the Roth IRA and college is you

can pay for room and board as long as

the student is enrolled for at least 50%

or halftime there are other qualifying

events and if you want me to discuss and

put it in the comments below and I will

be happy to go over them but the big one

is what else can you do with the Roth

IRA dollars if you want to have access

to those dollars before age fifty nine

and a half or before you want to get to

retirement when you can you can access

the contributions for basically anything

you have to have no reasons at all to

pull the contributions out of the Roth

IRA so anything that you put into the

Roth IRA just understand that you can

pull it right out

you just can't touch the growth so

whatever you put into the Roth IRA is

your contributions

anything that is of growth you don't

want to pull out until a qualifying

event or age 59 and a half and there's

one last bit that I want to share with

you so you understand about the Roth IRA

and that is the five-year rule now I'm

gonna do a separate video on the

five-year rule but a quick recap if

you're close to fifty nine and a half

you've never had a Roth IRA and you just

opened up one then you have to wait the

full five years and if that carries you

well past age fifty nine and a half then

you still have to meet that five year

requirement in order to pull out the

gains but the whole benefit of the Roth

IRA is long-term investing so you have

to wait it's quite some time for there

to be significant growth in order to

have those penalties so the five-year

rule in that case probably not a big

deal but you'll want to make sure that

you understand it so you don't make a

taxable mistake so the Roth IRA really

is like a Swiss Army knife of financial

planning because you can use it for so

many different things you can use it for

general expenses for retirement for

first-time home purchase or college

expenses if you've enjoyed this video be

sure to subscribe and leave your

comments down at the bottom

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