Ask Terry Questions IRAs / Rollovers / Withdrawl Rules: confusing language

IRAs / Rollovers / Withdrawl Rules: confusing language

By Terry Savage on December 03, 2023 | Financial Planning / Retirement

Hi terry – I appreciate your work and have used many of your links and resources – thank you. I have a small bit of money I need to roll over into an IRA before Dec 7th Yikes I know! They were late in getting the documents to me. Argh). I retired and this is a ‘bonus’ account that was held by my employer. I did not pay taxes on the money to date. I am 67. I understand the tax impact differences between a Roth IRA and a traditional. I want the flexibility of access to the money should I need it. In terms of making withdrawals from the IRA once I open it and I find the language confusing. The typical language found is:
“You can withdraw your after-tax contributions to a Roth IRA tax-free and penalty-free at any time and for any reason. Otherwise, withdrawing earned income from a Roth IRA before the 5-year aging requirement is satisfied and you are 59 1/2 or older is subject to a 10% penalty in addition to income taxes unless an exception applies. Withdrawals from a Traditional IRA prior to age 59 1/2 are subject to a 10% penalty including ordinary income tax unless an exception applies.”

My question is how do I keep access to the money as best possible? Since I am over 59 1/2 – must the money be kept in the IRA for 5 years?

Thank you.

Terry Says

Walk into a bank and tell them you need to rollover an IRA immediately. It will be a traditional IRA. Put them in contact with your company and have the rollover done immediately. When they ask where to put it, tell them in a money market account in the name of the IRA.

Don’t plan to use ANY of the money before age 59-1/2. And after that, know that any withdrawals will be taxed as ordinary income in the year of withdrawal. And the longer you wait to withdraw, the longer the money can grow tax-deferred.

Forget the Roth idea!

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