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Five year rule - Roth IRA withdrawal question

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    Five year rule - Roth IRA withdrawal question

    I've always heard you can take out the money you originally invested at any time penalty free (so long as it's not interest earned). I recently read that one caveat is it can only be after the account has been opened for 5 years. Does this mean that if a person only withdraws money they contributed, they'd have to pay a penalty if the account hasn't been open at least 5 years?

    #2
    The 5 year rule has to deal with earnings not CONTRIBUTIONS, those can be withdrawn at ANY time tax free!

    What is the Five-Year Rule for Roth IRA Withdrawals?
    An investor can withdraw his or her contributions to a Roth IRA at any time without tax or penalty. But that does not apply to any earnings or interest that you have earned on your Roth IRA investment.

    In order to withdraw your earnings from a Roth IRA tax and penalty free, not only must you be over 59 years-old, but your initial contributions must also have been made to your Roth IRA five years before the date when you start withdrawing funds. If you did not start contributing in your Roth IRA five years before your withdrawal, your earnings will not be considered a qualified distribution from your Roth IRA because the withdrawal violates the five-year rule.


    https://www.rothira.com/blog/the-fiv...ra-withdrawals

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      #3
      Thrif-t is spot on. One additional piece of advice I will add is to keep close track of how your money went into every Roth IRA you have. Track it by date and amount contributed. That way if you want to withdraw some or all of it, you can pay or not pay taxes correctly.

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        #4
        Thank you all for the advice and clarification.

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