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How To Withdraw Retirement Funds: Roth IRA - YouTube
Channel: Liz Hand
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I've got a riddle for you. Who is 5
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years old in 59 1/2 at the same
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time? Your tax-free Roth IRA withdrawal
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of course! Hey there and welcome back to
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the Happiness IRA where we talk about
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how money impacts your life. Today we're
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going to be talking about Roth IRA
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withdrawals: how they work and how that
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can be incorporated into your retirement
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income plan. But before we get into that,
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have you subscribed to this channel? This
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one. The one that we meet weekly and talk
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about all things retirement to all
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things money. Subscribe! Join our clan. If
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you have seen any of my other videos you
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will find that I am very partial to Roth
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IRAs. I think they're awesome for
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retirement simply because they have some
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tax perks that are worth considering as
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part of your retirement income plan.
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Tax-free withdrawals in retirement (big
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asterisk beside that my compliance
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Department will want you to know... and
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I'll give you all of those details.) So
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people want to know when can I take
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money from my Roth IRA. The optimal time
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is when you're 59 1/2 and
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have had the Roth IRA opened since you
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were 54 1/2 and that's
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because a Roth IRA should be opened for
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5 years in order to have all of the
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tax perks working in your best interest.
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So what happens if you haven't achieved
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those milestones? If you're younger than
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59 1/2 or if you haven't
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had that Roth IRA open for more than
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5 years... well let's say you put in ten
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thousand dollars and it's grown to
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fifteen thousand dollars (just for easy
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math for all parties involved.) When you
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take out that ten thousand dollars that
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is considered a return of capital, and so
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there is no taxes for that distribution.
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However if you have not achieved 59 1/2
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and having that account
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open for more than 5 years, then the
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growth (that five thousand dollars of
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growth that we're talking about) that
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would be taxable as ordinary income. And
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you'd have penalties on that if you are
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under age fifty nine and a half. So just
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make sure if you are cashing out a Roth
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IRA before those milestones that you
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know what the tax ramifications are and
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do the proper withholdings as needed. So
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how do you cash out?
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Sometimes it's just a phone call to the
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advisor that has to get the job
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accomplished and sometimes you have to
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sign a form. So be prepared for at least
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three to five business days to get that
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check. Ain't nobody happy when we wait
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too long to get money from our financial
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advisors. And you're anxious about the
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distribution, and the advisor is anxious
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about the distribution. So what's awesome
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about Roth IRAs in retirement?
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Let me just step on my soapbox and tell
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you. When you take out money it's money
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that's not counted towards your taxes.
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Not counted towards ordinary income. It's
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not taxable at all. And so if you think
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about a given year where maybe you have
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a Social Security check coming in, maybe
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you have a pension, or you have to take a
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distribution from your 401k or IRA - and
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that's kind of taxable income but you
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need just a little bit more... well that
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Roth IRA can be tapped into and it
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doesn't create extra taxes for you in
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that given year. So think about it if
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you're really staying under the radar of
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being taxed for Social Security (your
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Social Security being added back into
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your taxes) or your Medicare, you don't
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give that extra surcharge. That Roth IRA
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distribution is the one that can keep
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you under that threshold if you're
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getting pretty close to it. A Roth IRA is an
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awesome tool. I always suggest people
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consider that as part of their savings
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during their working years because it
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does create some options for you in
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retirement. Alright friends that's all I
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have for today, thank you so much for
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tuning in. I appreciate it as always! Has
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anybody been talking to you about your
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retirement income plan? If not I would
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love to have that conversation. So at the
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end of this video you will see a screen
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that has my website www.pleasantwealth.com. And on
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that website you can click a button to
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set a meeting. When we have a meeting
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we're really just looking at the basics
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of your financial situation and figuring
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out if you are a good fit for me if I am
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a good fit for you and if we can start
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working together to help you achieve
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your retirement goals. So with all of that
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good Roth IRA information I will leave
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you, and you take care!
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