#497 - The Rules for Roth Withdrawals

After listening to the past two episodes you now know how to make Roth contributions and conversions, that was the easy part.

Today we discuss the more complicated Roth rules for making withdrawals. To avoid unnecessary penalties and taxes you’ll want to make sure that you clearly understand the regulations surrounding Roth withdrawals. Listen to ensure that you don’t get caught unaware and needlessly get stuck paying avoidable taxes and fees.

Understanding how the five-year rule works

The rules for withdrawing funds from Roth IRAs are more complicated than you think–unless you qualify for the golden rule. If you are over 59 ½ and have had your Roth IRA open for more than five years then you can withdraw funds without penalties or taxes forever.

Whereas, if you haven’t hit those milestones there are various regulations of which you’ll need to be aware. Listen in to learn when the five-year rule starts, how to understand your tax liability, how to stay proactive, and what you can do now to lessen your Roth IRA tax burden now and in the future.

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

PRACTICAL PLANNING SEGMENT

[1:32] Building a target to work for to build healthy habits
[6:20] The golden rule of Roth withdrawals
[8:58] The order of withdrawals
[11:08] How the five-year rule works with contributions
[16:41] How the five-year rule works with conversions
[19:33] How the five-year rule works with a Roth 401K

LISTENER QUESTIONS

[27:11] On taking money from a 401K and moving it to a Roth IRA so that someone can manage it
[31:34] How to decide whether to convert funds into a Roth IRA
[35:03] Estimating Social Security income using the detailed calculator
[36:01] Clarifying the five-year rule start date
[38:40] Deciding whether to claim Social Security early