Asked by: Sergio Lamb
To take a tax-free distribution, the money must stay in the Roth IRA for five years after the year you make the conversion. If you withdraw contributions before the five-year period is over, you might have to pay a 10% Roth IRA early withdrawal penalty. This is a penalty on the entire distribution.
Which type of IRA will you get a 10% penalty if you take out the earnings portion before 59 ½ years old?
Roth IRA
If you withdraw Roth IRA earnings before age 59½, a 10% penalty usually applies. Withdrawals before age 59½ from a traditional IRA trigger a 10% penalty tax whether you withdraw contributions or earnings.
How can I avoid 10 penalty IRA?
Avoiding the 10% Penalty On Early IRA Withdrawals
- Withdrawals for medical expenses. …
- Substantially equal periodic payments (SEPPs). …
- Withdrawals after death. …
- Withdrawals after disability. …
- Withdrawals for first-time home purchases (up to a lifetime limit). …
- Withdrawals for qualified higher education expenses.