Roth IRA Help

05 Dec, 2009

IRA Withdrawal- Timing, Penalties and More

Posted by: admin In: Traditional IRA

Understanding IRA withdrawal rules is critical to your success in investing. If you don’t follow the rules and take out money when you are supposed to, you will be facing huge losses of your investment in the way of penalties in fines. Before we begin discussing the rules and guidelines, you should know that if you have a Roth IRA, these rules do NOT apply. Talk to your financial advisor about Roth IRA distribution specifically, because it is not subject to the same withdrawal regulations as other IRA accounts will be.


When you turn age 70 ½ you are required to start taking an IRA withdrawal every year. The exact amount of the withdrawal will be calculated using your account balanced divided by the joint life expectancy figure of yourself and your beneficiary.  That means that if you are expected to live longer, or if your beneficiary is younger, you will have a lower required withdrawal amount, and therefore lower taxes on the money. Also, you have to take your withdrawal by April 1 of the year after you turn 70 ½. Therefore, if you turn 70 ½ in 2009, you must take your first withdrawal by April 1, 2010, and so on.


IRA withdrawal rules aren’t just out there for the fun of it. No, if you don’t take your money, you’re going to get in trouble by Uncle Sam. When your withdrawal limit isn’t met, you are forced to pay a 50% penalty for the difference. What does that mean? Here is an example:

If your withdrawal limit is determined to be $6,700 annually, you must take it out. If you only take out $2,700 for some reason, that $4,000 difference is subject to a 50% penalty. That means you’ll lose $2,000 in penalties just because you didn’t take out enough money.

Keep in mind that you can always take out MORE than the minimum amount, but never less.

Other Tips for IRA Withdrawal

You can never be too careful when it comes to protecting your investments. Therefore, if you are not certain about IRA rules or guidelines and how they affect you, you should always talk to your personal financial advisor to make sure that you are doing things properly for your specific circumstances and situation. The general rules can be used as a guide, but you really need to make sure that you understand the rules as they apply to YOU.

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The purpose of this blog is to provide its visitors with valuable information and articles related to Roth IRAs. How Roth IRAs work and what are the main differences between Roth IRAs and traditional IRAs are just some of its topics.