How Do I Know When to Withdraw From a Roth IRA?

Are you nearing retirement and starting to think about tapping the funds you've been building? You're probably curious about several aspects. For instance, you may be wondering how and when to withdraw from a Roth IRA.

These are important questions — and you're not the only one asking. Understanding the withdrawal process can help ensure you get your money when you need it. Here's what you need to know about how to start taking distributions from your account.

Timing Matters

For many people, the time to withdraw from a Roth IRA is at age 59½ or later. If you withdraw from a Roth IRA before then, you could be subject to an additional 10% tax.¹

In order to make a qualified distribution, you also need to have maintained the Roth IRA account for at least five years. There are some exceptions to these rules, but in many cases, distributions taken too early will be subject to taxes and penalties.²

So how much can you withdraw from a Roth IRA, exactly? That's up to you.

Some types of IRA accounts have required minimum distributions, which means account owners must begin taking withdrawals by a certain age. But Roth IRA accounts don't have required minimum distributions during the owner's lifetime. That means you can keep the money in your Roth IRA as long as you choose. Likewise, there is no maximum withdrawal limit on your Roth IRA.

How to Make a Roth IRA Withdrawal

A few steps are involved in withdrawing from your Roth IRA account:

• To get started, you'll reach out to the financial institution that services your Roth IRA and ask that they begin the process. This may require submitting a distribution request online, in person or in the mail.
• Ask about the options for withdrawing your money. Some institutions offer wire transfers from the Roth IRA account to a checking or savings account; others might send you a check in the mail. You may also be able to write yourself a check or perform the transfer yourself online.
• If time is of the essence, ask for help in determining the quickest way to access your money. Some institutions offer same-day wire transfers. If your institution has in-person locations, a visit to the nearest office could be the fastest way to make a withdrawal and find the answers to your questions.

Tax Implications of Roth IRA Distributions

One of the main benefits of a Roth IRA is that your distributions — including both principle and interest­ — are tax-free. As long as you meet the requirements for a qualified distribution, you won't owe taxes on your withdrawal from a Roth IRA account. However, to ensure your withdrawal doesn't incur any taxes or penalties, it's a good idea to work with a trusted financial professional to evaluate your situation before taking a distribution.

Once you have your money, there's one last important step: Each year you make a withdrawal from a Roth IRA, you must complete IRS Form 8606 with your tax return.³ You'll use this form to report your withdrawals. It's the same form used for reporting certain contributions to other types of IRA accounts.

The Bottom Line

Reaching retirement is a major milestone. Everyone needs to decide whether and when to withdraw from their Roth IRA based on their unique needs and situation. When you're ready to dip into your Roth IRA savings, make sure you meet all the requirements. Work with your financial institution to determine how you wish to take your distributions.

   Timing your withdrawals after 59½ helps optimize your retirement strategy. Start Your Free Plan  

Sources

1. IRA FAQs — distributions (withdrawals). Internal Revenue Service. https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-distributions-withdrawals.
2. Publication 590-B (2023), distributions from individual retirement arrangements (IRAs). Internal Revenue Service. https://www.irs.gov/publications/p590b#en_US_2021_publink100089626.
3. About Form 8606, Nondeductible IRAs. https://www.irs.gov/forms-pubs/about-form-8606.