Can you pull out roth ira early

To discourage the use of IRA distributions for purposes other than retirement, you'll be assessed a 10% additional tax on early distributions from traditional and Roth IRAs, unless an exception applies. Generally, early distributions are those you receive from an IRA before reaching age 59½. The 10% additional tax applies to the part of the distribution that you have to include in gross income. It's in addition to any regular income tax on that amount.

Table of Contents Show

Exceptions to the 10% Additional Tax
Reporting the 10% Additional Tax
Tax Withholding and Estimated Tax
Quick rundown: the Roth IRA early withdrawal
Early withdrawals of Roth IRA contributions
Early withdrawals of Roth IRA earnings

Exceptions to the 10% Additional Tax

Distributions that you roll over or transfer to another IRA or qualified retirement plan aren't subject to this 10% additional tax. This is true as long as you follow the one IRA-to-IRA rollover per year rule. For more information on rollovers, refer to Topic No. 413, Rollovers from Retirement Plans and visit Do I Need to Report the Transfer or Rollover of an IRA or Retirement Plan on My Tax Return?

Exceptions to the 10% additional tax apply to an early distribution from a traditional or Roth IRA that is:

Made to a beneficiary or estate on account of the IRA owner's death
Made because you're totally and permanently disabled
Made as part of a series of substantially equal periodic payments for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and your designated beneficiary
Not in excess of $10,000 used in a qualified first-time home purchase
Not in excess of your qualified higher education expenses
Not in excess of certain health insurance premiums after you have received unemployment compensation for 12 consecutive weeks (or would have been eligible to receive unemployment compensation but for your self-employed status)
Not in excess of your unreimbursed medical expenses that are more than a certain percentage of your adjusted gross income
Made directly to the government to satisfy an IRS levy of the IRA under section 6331 of the Code
A qualified reservist distribution
Excepted from the additional income tax by federal legislation relating to certain emergencies and disasters
Not in excess of $5,000 and the distribution is a qualified birth or adoption distribution

Refer to Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs) for more information on these exceptions and on IRA distributions generally.

Other exceptions apply to distributions from other qualified employee retirement plans. For information on these exceptions, refer to Topic No. 558 or Publication 575, Pension and Annuity Income.

Reporting the 10% Additional Tax

The 10% additional tax is reported on Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts and Schedule 2 (Form 1040), Additional Taxes PDFPDF. However, you don't have to file Form 5329 if your Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. shows distribution code 1 in Box 7. In this instance, you need only enter the 10% additional tax directly on Schedule 2 (Form 1040). If you qualify for one of the exceptions to the 10% additional tax, but your Form 1099-R doesn't have a distribution code 2, 3, or 4 in the box labeled "distribution code(s)," or if the code shown is incorrect, you must file Form 5329 and Schedule 2 to claim the exception.

Tax Withholding and Estimated Tax

Federal income tax withholding is required for distributions from IRAs unless you elect out of withholding on the distribution. If you elect out of withholding, you may have to make estimated tax payments. For more information on withholding and estimated tax payments, refer to Publication 505, Tax Withholding and Estimated Tax.

Retirement accounts aren’t always known for their flexibility, which is why the relaxed rules that apply to a Roth IRA early withdrawal stand out: Because these accounts are funded with after-tax dollars, you’re free to pull out contributions at any time.

You can tap a Roth IRA, up to the amount you’ve contributed, for any reason, ranging from the responsible (there’s a hole in your roof and your kitchen is now a swimming pool) to the frivolous (you want to build a rooftop swimming pool above your kitchen).

That doesn't mean you should tap the account. The following quiz will give you the quick answer to whether your Roth IRA early withdrawal will be taxed — or read on for more details below.

Quick rundown: the Roth IRA early withdrawal

If you want to withdraw contributions: After-tax contributions — commonly called "basis" — can be withdrawn at any time, for any reason, with no taxes or withdrawal penalties.
If you want to withdraw earnings: You must satisfy two requirements for a qualified distribution to avoid both taxes and the 10% early withdrawal penalty. First, you must have held a Roth IRA account for at least five years, a clock that starts ticking at the beginning of the year of your first contribution. Second, you must be at least 59½, disabled, dead (the distribution is taken by heirs) or using up to $10,000 toward a first-home purchase.

If you don’t satisfy both points, a withdrawal of earnings is likely to come with income taxes and penalties. Some exceptions, outlined below, allow you to avoid the 10% early withdrawal penalty — but not taxes — on certain early distributions that aren’t qualified.

Early withdrawals of Roth IRA contributions

It might give you peace of mind to know Roth IRA contributions can be tapped in a pinch. They’re not a replacement for an emergency fund or an excuse to live above your means, but if things get dire, they can be a source of quick cash.

If you take a Roth IRA early withdrawal, contributions come out first, which is a rare move by the IRS to make things easier on you. You don’t have to worry about taxes — or about accounting for which portion of your distribution comes from earnings, and which from contributions — unless you pull out more than you’ve contributed.

Amounts converted into the Roth IRA come out next, on a first-in, first-out basis, and earnings come out last.

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Early withdrawals of Roth IRA earnings

Need to tap earnings? That’s where things get hairy.

You get to take qualified distributions tax-free. Trouble is, the IRS’s definition of a qualified distribution is narrow, and a distribution of earnings before age 59½ probably won’t meet it.

Early distributions of earnings for these reasons are considered qualified: not subject to taxes or the 10% penalty

Early distributions of earnings for these reasons are considered exceptions: taxable as income, but not subject to the 10% penalty

You've held a Roth IRA for at least five years AND you are taking the distribution in one of the following circumstances:

You're age 59 1/2 or older.
You're permanently and totally disabled.
As a beneficiary of the Roth IRA after death of the account owner.
To use up to $10,000 for a first-time home purchase.

You're taking the distribution for qualified education expenses.
You’re withdrawing up to $5,000 in the year after the birth or adoption of your child.
You are taking the distribution for unreimbursed medical expenses that exceed 7.5% of your adjusted gross income for the year or for health insurance premiums while you are unemployed.
You are taking qualified reservist distributions (for members of the military reserve called to active duty).
You are taking a series of substantially equal distributions.
The distribution is due to an IRS levy.
You have not held a Roth IRA for at least five years, but you are 59 1/2 or older, permanently and totally disabled, inherited the Roth IRA after death of the account owner or using up to $10,000 for a first-time home purchase.

First, to avoid both income taxes and the 10% early withdrawal penalty, you must have held a Roth IRA for at least five years. This condition is satisfied if five years have passed since you first made a contribution to any Roth IRA, not necessarily the one you plan to tap. (There is an exception, however: If you’ve converted assets from a traditional IRA or 401(k) into a Roth IRA, each converted amount has its own five-year clock. Here's more on the Roth five-year rules.)

Second, you must be age 59½ or older, permanently and totally disabled or using the money for a first-time home purchase (and for that last one, there’s a $10,000 lifetime limit). Beneficiaries are also able to take qualified distributions after the death of the account owner.

If you don’t meet both rules for qualified distributions, the IRS will waive the penalty (but not taxes) if you take a distribution for one of these reasons:

Qualified education expenses
Unreimbursed medical expenses that exceed 7.5% of your adjusted gross income for the year
You withdraw up to $5,000 in the year after the birth or adoption of your child
Health insurance premiums while you are unemployed
Qualified reservist distributions (for members of the military reserve called to active duty)
A series of substantially equal periodic payments — recurring distributions designed to help you weather prolonged financial hardships before retirement age — which generally require that you take at least one distribution each year for five years or until you turn 59½, whichever comes later

Outside of those criteria, you may be taxed and penalized on an early withdrawal of earnings. Depending on your tax rate, that could eat a third to half of the taxable portion of your distribution.

In other words: With the exception of rare and dire circumstances, a Roth IRA early withdrawal isn't worth it.