Q. I have a question regarding the Roth IRA five-year rule. If I contributed $1,000 for five consecutive years, from 2010 to 2015, can I withdraw the full $5,000 plus gains in 2015 without penalty or do I need to wait until 2019 to withdraw the 2014 contribution? — Roth contributor

A. Let’s go over the rules.

Regardless of age, contributions to a Roth IRA can be taken out at any time without penalty.

However, withdrawals of earnings made prior to age 59 ½ will be subject to a 10 percent early withdrawal penalty.

For those over age 59 ½, earnings can be withdrawn penalty-free if five years have passed since the tax year of your initial contribution – the five-year rule, said Claudia Mott, a certified financial planner with Epona Financial Solutions in Basking Ridge.

It does not pertain to contributions made in subsequent tax years, she said.

“Given that your initial contribution was made in 2010, if you have reached the age of 59 ½, withdrawing your $5,000 contributions plus earnings will not result in a penalty,” she said.

Mott said there are other qualifications that can provide for penalty-free distributions from a Roth IRA including:
· You are totally and permanently disabled.
· The distribution, up to $10,000, is used to build or buy a first home.
· The distribution is part of a series of equal periodic payments.
· Unreimbursed medical bills that are greater than 10 percent of your adjusted gross income are paid with the distribution.
· Medical insurance premiums are paid with the distribution during a period of unemployment.
· Qualified higher education expenses are covered by the distribution.
· You are a qualified active-duty reservist.

And the IRS can levy the account to pay back taxes, Mott said.

If you’re taking the distribution and you’re ready to start building up the account again, for 2019, the maximum contribution is $6,000, Mott said. Those age 50 and over can contribute an additional $1,000 catch-up.

If you’re not within the income limits, the contribution you make could be reduced or eliminated, she said.

“For those filing married jointly, contributions will be phased out for incomes between $193,000 and $203,000 and eliminated entirely above that level,” she said. “Single filers must have incomes below $122,000 to make a full contribution and those earning more than $137,000 cannot contribute.”

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