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5 Year Rule

Ok, I’ll keep this one simple. Last year we had a total of 2188 appointments scheduled. Some calls developed into a business, some developed into a 15-minute education session, and others turned into nothing. We’re happy to help! As you might know, at Take Point Wealth we are all number crunchers and analyze data from retirement investing to general market realities. Among the things we track are the kinds of concerns we get and how often they are asked.

One frequent concern individuals had had to do with the five-year guideline on a Roth IRA. Among the factors we like working with the Roth IRA for most customers (aside from the tax-free growth), you can secure your contributions anytime you want without any tax or penalty. For instance, let’s say you took $1,000 in 2015 and then contributed $2,000 this year. For some reason, you require to take out $1000 this year. Could be that you encountered some monetary difficulties or emergency and had no other alternatives. Since you made a total of $3,000, you could take that $1,000 with no charge or tax, unlike the other kinds of IRA’s. The reason is simple; you contributed that after-tax money and the IRS has already been paid. Since your tax obligation has already been satisfied, the IRS is ok with this.

Many individuals mistakenly think you need to wait five years before getting any contributions. When a client at Take Point Wealth needs to withdraw, we let them know how much they can secure before incurring any penalty or tax.

The five-year rule describes those that are close to the age of 59.5 where you can take out any cash in your Roth IRA without any tax or penalty. The issue here is that when you turn 59.5 if you want to secure any growth, you should have had the Roth for at least five years leading up to the qualified withdrawal. For example, let’s say you open a Roth IRA this year, and you are 57 years of age. When you turn 59.5, you can get your contributions, BUT you would need to wait five years until you might touch the growth. In this example, the year in which you turn 62 would be the very first year you could withdrawal contributions in addition to development with no tax or charge.

If you wish to work with an SEC signed up, Fiduciary consultant, we would enjoy conversing with you.