What are the penalties for withdrawing from a Roth IRA?

What are the penalties for withdrawing from a Roth IRA?

Withdrawing from a Roth IRA can lead to penalties if you don't meet certain conditions. Generally, if you withdraw earnings before age 59½ and before the account is at least five years old, you may face a 10% penalty and income tax on those earnings.

Are there any exceptions to these penalties?

Yes, there are exceptions. You can withdraw earnings without penalties if you're using the funds for a first-time home purchase, qualified education expenses, or if you become disabled.

What about withdrawing contributions? Is that different?

Withdrawing your contributions to a Roth IRA is different. You can withdraw your contributions at any time, tax- and penalty-free, since you've already paid taxes on that money.

What happens if I withdraw too much?

If you withdraw more than your contributions, the excess may be subject to penalties and taxes, especially if it's earnings and you don't meet the withdrawal conditions.