Withdrawals from Roth IRAs

Question: Are withdrawals from Roth IRAs tax-free once I retire?

Answer: Yes, in most cases. One of the biggest advantages of Roth IRAs is that all your contributions are made with after-tax dollars, instead of pre-tax dollars used for 401(k) and traditional IRAs, therefore, you are allowed to withdraw your money whenever you want, for any reason, without tax or penalty.

There are some things you have to comply with, however, to enjoy such benefits. First and foremost, you need to follow the 5-year rule for opening the Roth (to have had the Roth for five years or longer). Secondly, you must be at least 59½ to be able to make withdrawals without paying a 10% early-withdrawal penalty tax on the earnings that you withdraw.