Saturday, December 21, 2019

Special Withdrawal Rule for Higher Education

Special Withdrawal Rule for Higher Education
Roth IRA withdrawals are 100% tax-free once you reach age 59.5, but the earnings are typically taxed and penalized if they’re withdrawn before then. Which means that in most cases you’ll want to avoid early withdrawals.

But there are some special rules that allow you to get around those penalties, especially if you’re withdrawing the money for college expenses:

You can withdraw up to the amount you’ve contributed without taxes or penalties at any time and for any reason. For example, if you’ve contributed $50,000 to your Roth IRA and it’s grown to $75,000, you can withdraw up to $50,000 any time you want without consequence.
You can withdraw the earnings penalty-free (but not tax-free) if the money is used for college expenses for you, your spouse, your children, or your grandchildren.

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