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Question for the Money Doctors

Question submitted on Feb 21, 2013.

Question

My mom and dad who are 65, want to take out their Roth IRAs completely (all at once) is that possible? all their IRAs are in mutual funds and my dad is afraid of the risky market. he is going to retire in 1 yr. I read and it said that they have to take it out in installments. Thanks.

Answer

Distributions from Roth IRAs should not be restricted in your parents'' situation as long as they have had the accounts for at least five (5) years. Principal, meaning direct contributions, may be withdrawn at any time without tax or penalty as distributions are deemed to come from "principal" prior to any earnings.

Eligible distributions of earnings, meaning they are free from tax and penalty, generally must be after the five (5) year account requirement is met and the account owner must also meet the age requirement of 59-1/2. Your parents being 65 justifies the distribution as they have reached 59-1/2 years of age. If they have had the accounts for the required length of time, qualified withdrawals may be made in any amount on any schedule.

What you read may be specific to the mutual funds they own as opposed to the Roth IRAs themselves. You will have to check with the fund company regarding any distribution restrictions requiring installments specific to those funds.


For additional information visit http://www.360financialliteracy.org/