I have a question about IRA withdraw penalties. If I withdrew Roth IRA funds of amounts I contributed four years ago, why am I being charged IRA withdraw penalties now?
You must have a Roth IRA for five years before you can take a qualified distribution. It doesn’t have to be the same Roth IRA as the one you’re withdrawing from.
The five-year period starts on Jan. 1 of the first tax year you opened and funded a Roth IRA. It ends five years later on Dec. 31. This is a lifetime qualification. So, after you meet the holding-period requirement once for the first Roth IRA you own:
- You’ll have met the holding periods for all Roth IRAs you own.
- Regarding IRA withdraw penalties, you can take out earnings tax-free and penalty-free after age 59 1/2 — or earlier if you qualify for a Form 5329 exception.
If you’ve contributed too much to your IRA for a given year, you’ll need to contact your bank or investment company to request the withdrawal of the excess IRA contributions. Depending on when you discover the excess, you may be able to remove the excess IRA contributions and avoid penalty taxes.
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