Open a Roth IRA and take advantage of after-tax benefits as you save for retirement.
With a Roth IRA, contributions are not tax-deductible, but earnings can grow tax-free, and qualified withdrawals are tax- and penalty-free. Roth IRA withdrawal and penalty rules vary depending on your age, how long you've had the account, and other factors.
Before making a Roth IRA withdrawal, keep in mind the following rules to avoid a potential 10% early withdrawal penalty:
You may be able to pay all or a portion of certain distributions. Please consult with your tax advisor and learn more at IRS Publication 590-B.
You can withdraw contributions you made to your Roth IRA anytime, tax- and penalty-free. However, you may have to pay taxes and penalties on earnings in your Roth IRA.
If you take a distribution of Roth IRA earnings before you reach age 59½ and before the account is five years old, the earnings may be subject to taxes and penalties. You may be able to avoid penalties (but not taxes) in the following situations:
If you're under age 59½ and your Roth IRA has been open five years or more, your earnings will not be subject to taxes if you meet one of the following conditions:
If you haven't met the five-year holding requirement, your earnings will be subject to taxes but not penalties.
If you've met the five-year holding requirement, you can withdraw money from a Roth IRA with no taxes or penalties.
Remember that unlike a Traditional IRA, with a Roth IRA there are no required minimum distributions.
1. To make a qualified withdrawal from a Roth IRA account, retirement savers must meet the five-year period defined by the IRS and be at least 59½ years old. Please consult with your tax advisor and you can learn more at IRS Publication 590-B.
Schwab does not currently perform these substantially equal periodic payment (72(t)) calculations. You should speak with a tax advisor. Find more information on these calculation methods in IRS Revenue Ruling 2002-62.
This tax information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends that you consult with a qualified tax advisor, CPA, financial planner, or investment manager. Depending on the type of account you have, there are different rules for withdrawals, penalties, and distributions. Please understand these before opening your account.
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