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Question about withdrawal from ROTH 401-K without penalty after 5 years.


I am contributing some amount to ROTH 401-K since 2014. Just want to know if I can withdraw the primary contribution amount (Not the growth / gain) after 2019 i.e. 5 years without any penalty ? Are there any specific rules around withdrawal? I am not 59 plus.

Mar 06, 2017 by Ram in  |  Flag
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Chris Schiffer Level 14

A withdrawal from a Roth IRA (including both your contributions and investment earnings) is completely tax free (and penalty free) if : 1) it is made at least five years after you first establish any Roth IRA, and 2) one of the following also applies: - You have reached age 59½ by the time of the withdrawal - The withdrawal is made due to qualifying disability - The withdrawal is made for first-time homebuyer expenses ($10,000 lifetime limit) - The withdrawal is made by your beneficiary or estate after your death

Withdrawals that meet these conditions are referred to as qualified distributions. If the above conditions aren't met, any portion of a withdrawal that represents investment earnings will be subject to federal income tax and may also be subject to a 10 percent premature distribution tax if you are under age 59½.

Withdrawals are considered made in this order: Withdrawals from Roth IRAs are considered made from contributions first then earnings. So if you only make a distribution after the five years up to your contributions , no penalty. If you take a full distribution and investment earnings (growth , dividends and interest) will be subject to the penalty.

I hope this helps. Contact me if you have any details you would like to share for a more specific answer.

Comment   |  Flag   |  Mar 11, 2017 from BASKING RIDGE, NJ

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