Are withdrawals from Roth IRAs tax-free

One of the many benefits of Roth IRAs is the fact that you won’t be paying any taxes when you withdraw money. That’s because by then you’ll have paid taxes on your contributions. This is the complete opposite of 401(k)s and traditional IRAs, so don’t get them confused, otherwise, you might be missing out on savings.

But such benefits do come with some caveats. Namely, you can only make tax-free withdrawals from Roth IRAs if you’ve had your account for at least five years, so it’s important to start contributing to one early on.

Furthermore, you must be at least 59½ before you withdraw, otherwise, you’ll be incurring a 10% early withdrawal penalty. Most retirees fall into this trap when disaster strikes if they don’t have savings for rainy days set into place. Luckily, after this period there are no other penalties or restrictions for you to worry about.