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Qualified withdrawals for Roth IRA are tax-free. This is their best feature, however, to be a qualified withdrawal, you must be 59 ½ years of age and your account must be open for at least five years. If you withdraw before the age of 59 ½ or before the fifth year of your account, you will be charged for taxes for the earnings withdrawn and the 10% early withdrawal penalty.

Roth IRAs are intended to be long-term retirement savings, but you may go through situations that may require you to tap into you account before the right year and age. Many people may experience this, especially now that the economy is going through twist and turns.

Now the question is, how can you tap into your account before reaching its fifth year or the age of 59 ½? There are some exceptions that Roth IRA may consider for early withdrawals. The following withdrawal will void the 10% early withdrawal penalty:

• Funds for un-reimbursed medical expenses are an exception.  An un-reimbursed medical expense that surpasses 7.5% of your adjusted gross income (AGI) will exempt you from the 10% penalty.
• If you lost your job, funds spent for personal medical insurance will be penalty-free. This also applies if the funds will be for the medical use of your spouse or other dependants.
• Disability is another exception that Roth IRA considers. You just have to provide them a proof of your disability to be exempted from the 10% penalty.
• Upon the death of the owner, the funds paid by Roth IRA to the beneficiary will not be charged for any penalty.
• If the distribution is considered a part of an equal payment program, the person will not be liable for penalty. Remember that the owner must be 59 ½ years old or the distribution has already lasted for five years.
• You will also be exempted from the withdrawal fee if the funds will be used to purchase a house. The owner, spouse or dependants must prove that they are first time home-buyer to qualify. A $10,000 withdrawal will be granted.
• If the funds will be used to pay a higher education for the owner or dependants, the withdrawal will be penalty free. This exception applies for tuition, fees, books and supplies.

Remember that the given withdrawal exceptions will only exempt you from the 10% withdrawal fee; you may still be liable to pay for the taxes for the earnings withdrawn.

Let’s say you have an early withdrawal of $10,000 to purchase a house. You are qualified to be a first time home buyer, so Roth IRA will exempt you from the penalty. However, if your account is open for less than five years, you will still be liable to pay tax for the earnings withdrawn.

We hope this article will help you save some money. Don’t forget to check out the Roth IRA Conversion Calculator page if you’re considering a change in IRA.