When comparing individual retirement accounts (IRAs), Roth IRAs have a distinct advantage over traditional IRAs. Traditional IRAs require you to receive minimum distributions at age 70 1/2, while Roth IRAs can remain untouched indefinitely. Roth IRAs may not offer the upfront tax advantages as traditional IRAs, but Roth IRAs have more flexible withdrawal rules.
Qualified Distributions
Qualified or "normal" distributions from your Roth IRA can begin when you turn 59 1/2 years of age, provided that you've been contributing to the account for at least five years. However, the Internal Revenue Service points out that you don't ever have to receive distributions from your Roth IRA. Your designated beneficiary can receive a fully-intact Roth IRA upon your death.
Early Withdrawal
You can access your Roth IRA contributions at any time without paying a tax penalty on the amount you take out. But if you dip into your investment earnings (the amount of interest that your Roth IRA has accrued above your contribution amount) before age 59 1/2, you will be subject to a 10 percent penalty unless you make the withdrawal for a "qualifying reason," as determined by the Internal Revenue Service.
Qualifying Reasons
CNN Money states that both contributions and earnings from a Roth IRA can be withdrawn without the 10 percent penalty if the money is used to pay for you, your children or grandchildren to go to college; if the cost of your medical expenses is more than 7.5 percent of your adjusted gross income; if up to $10,000 is used to purchase a home for the first time; or if you become disabled.
Calculating Penalties
Say a Roth IRA is worth $40,000; $20,000 is comprised of contributions and $20,000 is comprised of earnings. If you were to take $30,000 from your Roth IRA before the age of 59 1/2, the IRS would tax you based on the amount of the earnings removed: $10,000.
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