Understanding the 5-Year Rule for Roth IRAs

Let’s consider that you are contributing to your companies Roth 401k and you do so for a number of years. Eventually, you decide to retire at age 62.

You decide to open a Roth IRA and facilitate a rollover from your Roth 401k.

You now want to take funds out of your Roth IRA (after all you have attained age 59 ½) and pay off your house.

Buyer beware. Remember the Roth IRA also carries a 5-year requirement. You must attain age 59 ½ AND have the Roth IRA open for 5 years to avoid a penalty on the gains.

You can always withdraw your contributions penalty-free but have to meet the rule above to get out earnings penalty-free!


Information in this material is for general information only and not intended as investment, tax, or legal advice. Please consult the appropriate professionals for specific information regarding your individual situation prior to making any financial decision.

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