Roth IRA Rules

A Roth IRA is a unique type of savings plan that is one of the newer financial vehicles that can be used to save for retirement, a down payment for a first-time home purchase or education expenses. But Roth IRA Rules state how the money can be withdrawn tax-free from this type of savings plan.

There are really 2 sets of rules when it comes to withdrawing your contributions without having to pay taxes or penalties. The first set is as follows:
1. The distribution must be made on or after the date you become age 59 1/2; or
2. Made to your beneficiary, or to your estate, after you die; or
3. Made to you after you become disabled within the definition of the IRS code; or
4. Used to pay for qualified first-time homebuyer expenses.
The other rule is that the withdrawal cannot be made after the five-tax-year period to be considered qualified.

If you are considering opening a Roth IRA, it is important that you understand the Roth IRA rules. In the event that you would need a distribution, these Roth IRA rules would apply.

While a Roth IRA is an investment vehicle, it is reassuring to know that the money is available if you need it in case of an emergency. A Roth IRA is just one part of a diversified portfolio and is a great way to save for a child’s education.