When can I start pulling money out of my Roth IRA?

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in Small Business Tax

O.R. from San Jose, Calif., writes:


Q. I set up a Roth IRA in late 1999. I'm turning 59 in May, so I'm wondering when I can start taking tax-free distributions from the Roth. Do I have to wait until the account has been open exactly five years or can I begin distributions any time this year?


A.
The short answer is that you'll have to wait until November to start receiving tax-free distributions from your Roth IRA. Here's why:

You can pull money tax-free from your Roth IRA if you've reached age 59 1/2 and you've owned the Roth account for at least five years. The starting date for the five-year period is the first day of the tax year for which your initial Roth IRA contribution was made. Because you established the Roth IRA with an initial contribution for tax year 1999, your official starting date is deemed to be Jan. 1, 1999. So you satisfied the five-year requirement as of Jan. 1, 2004.

But the law clearly states that you must reach age 59 1/2 to qualify for tax-free treatment. So if your birthday is May 15, you must wait until at least Nov. 15 to satisfy that requirement.

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