Roth IRA - Can a Disabled Person Withdraw All Funds before Age 59 1/2 with no Penalty?
Posted by admin | Under disabled person Tuesday Sep 30, 2008Would the earnings still be non-taxable?
Is the "5 year" period irrelevant if the person is disabled?
"What happens to my Roth IRA if I'm disabled?
If you're totally and permanently disabled, you can withdraw your Roth IRA earnings tax-free five years after you made the first contribution. The same stipulation applies if you are over 59 ½ years old. Until that time, you most likely will be subject to the 10% penalty tax applicable to early withdrawals."
"What if I need the money before retirement?
While you cannot borrow from an IRA, including a Roth IRA, you may be able to withdraw funds from it if you can accept paying a surcharge. Generally, withdrawals taken before age 59½ will be charged a 10% penalty. If you've had your Roth IRA for a minimum of five years, a series of exceptions are triggered. Exceptions to the penalty occur if you are totally and permanently disabled, or you set up a plan to make regular, equal withdrawals over your life. Other penalty exceptions are granted to pay health insurance premiums if you are unemployed, to pay certain higher education expenses such as tuition, room and board, or to help pay for a home if you haven't been a homeowner for at least two years. This exception carries a lifetime limit of $10,000. This means that if you withdrew $6,000 from your IRA for a down payment on a home eight years ago, sold it, have been renting for the past three years, and now want to use money from your IRA again to help with a down payment, you'll only be able to withdraw $4,000 without penalty."
https://www.financialengines.com/FeContent?&s=184a232d586763&pact=irgahmro&act=irgahmro#q15
There's an AND in the requirements. So the 5 year period IS relevant.
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If you have not had the Roth IRA account for five years, then distributions of earnings are taxable regardless of your age or whether you are disabled or not.
However, if you are disabled, then a taxable withdrawal from a Roth IRA will not be subject to the 10% penalty which is in addition to income tax.
References :
"What happens to my Roth IRA if I'm disabled?
If you're totally and permanently disabled, you can withdraw your Roth IRA earnings tax-free five years after you made the first contribution. The same stipulation applies if you are over 59 ½ years old. Until that time, you most likely will be subject to the 10% penalty tax applicable to early withdrawals."
"What if I need the money before retirement?
While you cannot borrow from an IRA, including a Roth IRA, you may be able to withdraw funds from it if you can accept paying a surcharge. Generally, withdrawals taken before age 59½ will be charged a 10% penalty. If you've had your Roth IRA for a minimum of five years, a series of exceptions are triggered. Exceptions to the penalty occur if you are totally and permanently disabled, or you set up a plan to make regular, equal withdrawals over your life. Other penalty exceptions are granted to pay health insurance premiums if you are unemployed, to pay certain higher education expenses such as tuition, room and board, or to help pay for a home if you haven't been a homeowner for at least two years. This exception carries a lifetime limit of $10,000. This means that if you withdrew $6,000 from your IRA for a down payment on a home eight years ago, sold it, have been renting for the past three years, and now want to use money from your IRA again to help with a down payment, you'll only be able to withdraw $4,000 without penalty."
https://www.financialengines.com/FeContent?&s=184a232d586763&pact=irgahmro&act=irgahmro#q15
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