How to Pull Money From a Roth IRA
Roth IRAs are popular retirement plans because, although you can't deduct contributions from your taxes, they offer a unique tax benefit. With a Roth IRA, not only are investment earnings not taxed while in the account, they are never taxed if properly withdrawn after you retire. Like traditional IRAs, Roth IRA rules do allow early distributions for specific reasons. Be careful to follow the IRS rules anytime you pull money from a Roth IRA. Otherwise you may incur a penalty tax of 10 percent of the amount withdrawn.
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Instructions
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Consult with your financial advisor and/or plan administrator. Explain that you would like to pull money from your Roth IRA.
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Follow the procedure established by your IRA provider (such as a bank, mutual fund, or brokerage firm). The process varies from one institution to another. Usually a retirement plan specialist will handle will discuss the transaction with you to be sure you understand the possible tax implications. Otherwise, the actual withdrawal of funds is primarily the same as for any other type of account.
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Complete IRS Form 8606 (Nondeductible IRAs), even if you are only withdrawing money you have contributed to the Roth IRA. You may withdraw contributions anytime. Form 8606 is used to determine if the money withdrawn will be considered contributions, rollover funds, or earnings.
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Fill out IRS Form 5329 (Additional Taxes on Qualified Plans) when you withdraw any money from a Roth IRA early other than contributed funds. This is an IRS requirement, even if the money withdrawn is exempt from tax penalties. Form 5329 is used to calculate regular taxes due on funds withdrawn early as well as penalties.
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Attach Form 8606 and Form 5359 to your tax return for the year in which the money was withdrawn from your Roth IRA.
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Tips & Warnings
Unlike traditional IRAs, there is no mandatory distribution for a Roth IRA when you reach age 70 1/2. You may leave money in a Roth IRA as long as you like.
