How to Close a Roth IRA
A Roth IRA is a great way to invest money tax-free for retirement. This type of IRA offers advantages over traditional IRAs, which offer tax-deferred (not tax-free) investments. If you've been investing regularly in a Roth IRA, you'll hopefully watch as it grows into a sizable nest egg. But how do you go about accessing your Roth IRA when it's time to withdraw all of that money you've invested over the years?
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Instructions
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Wait until you're 59-1/2 to begin withdrawing your money. This is the minimum age that you can begin withdrawing funds without paying an early-withdrawal penalty. While your original contributions are tax free, you will be taxed on any gains that your contributions have made.
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Make sure it's been at least five years since your Roth IRA was set up. This is another requirement for ensuring that the money you remove from the IRA counts as a qualified distribution. Nonqualified distributions are subject to the same 10 percent penalty that early withdrawals are. This means that any amount you withdraw beyond your original contributions will be taxed a 10 percent penalty on top of whatever income tax is owed.
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Use the fund for a house or college tuition. If you can show that the money is being used to purchase a house or pay for college tuition, you won't have to pay the 10 percent penalty for making an early withdrawal.
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You can officially close your account with a simple letter to the company handling the account. If there is any remaining balance, you will be sent that balance. There is no special paperwork you need to fill out unless you are rolling over the balance to a different company.
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