How Can I Withdraw Money from My Roth IRA?

 

The information set forth below is intended only as a brief, general overview of certain federal income tax provisions. It should not be considered tax, legal, or investment advice. Domini Social Investments LLC, DSIL Investment Services LLC, and their affiliates and agents are not tax advisors, and do not provide tax advice.

 

Each person’s financial situation is unique. All information and examples provided here are for general informational purposes only, and are addressed in general to a hypothetical reader, not to you specifically. Tax law is complex, subject to change at any time, and has many rules, details and exceptions. State and local tax law varies from federal tax law. To learn more about federal tax law and rules, details, and exceptions concerning IRAs, you should read IRS Publication 590 “Individual Retirement Arrangements (IRAs)”, available at www.irs.gov or by calling the IRS at 1-800-TAX-FORM (1-800-829-3676). If you have questions, and for tax advice, you should consult a tax or financial advisor before acting.

 

 

Money contributed to your Roth IRA may be withdrawn tax-free at any time. In addition, you can withdraw investment earnings tax-free if they are a "qualified distribution" under IRS rules. Please note that unlike a Traditional IRA, the required minimum distribution rules of the IRS generally do not apply to Roth IRAs, with certain exceptions.

 

A qualified distribution meets the following requirements:

 

You satisfy the Roth 5-year holding period requirement as computed by IRS rules, and

 

• You have reached age 59 ½.
• You are disabled.
• You are the beneficiary of a deceased IRA owner.
• You use the distribution to pay certain qualified first-time homebuyer amounts.

 

If the withdrawal is not a qualified distribution, then any portion of the distribution attributable to any earnings is subject to tax as ordinary income and possibly a 10% penalty. The 10% penalty may not apply if one of the exceptions listed below applies:

 

• You have reached age 59 ½.
• You are disabled.
• You are the beneficiary of a deceased IRA owner.
• You use the distribution to pay certain qualified first-time homebuyer amounts.
• You have significant unreimbursed medical expenses.
• You are paying medical insurance premiums after losing your job.
• The distributions are not more than your qualified higher education expenses.
• The distribution is due to an IRS levy of the qualified plan.
• The distribution is a qualified reservist distribution.   
• You withdraw money in a series of “substantially equal period payments” based on your life expectancy. Please consult your tax advisor or visit the IRS website at www.irs.gov for details on this method.

 

Are Federal Income Taxes Withheld from My Distributions?
The tax code requires that you make a choice concerning the distributions you receive from your Roth IRA. The law requires that federal income tax be withheld from all Roth IRA distributions (other than certain distributions of excess contributions and certain qualified distributions), unless you tell us that you do not want any taxes withheld. If you choose to have taxes withheld, they will be withheld at a flat rate of 10% (or higher amount that you choose) of the amount of each distribution and turned over to the government as a prepayment of your federal income tax liability for the year the distribution is made.

 

Could My Withdrawals Be Taxed If I Have a Roth Conversion IRA?

 

If you converted a Traditional IRA to a Roth IRA and withdrew money less than five years after making the conversion as computed by law, you may be subject to a 10% IRS penalty on a portion of the withdrawal, including any earnings, unless an exception above applies.

 

A Note on Taxable Withdrawals
IRS rules dictate that all withdrawals are deemed to be made in the following order:

 

• Withdrawals of contributions to regular (contributory) Roth IRAs
• Withdrawals of conversion contributions on a first-in, first-out basis
• Withdrawals of all earnings

 

For further details, please see pages 20-21 in our IRA Disclosure Booklet. 

 

 

If your company offers a SEP or SIMPLE retirement plan, call 1-800-582-6757 to ask how to add the Domini Funds to your plan.

 

The Domini Funds are subject to market fluctuations and are not insured. You may lose money. Investment return and principal value will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Although the Domini Funds Investor class shares are no load, certain fees and expenses apply to a continued investment that are described in the Prospectus. There is, for example, an annual $10 maintenance fee for Domini IRA accounts.