Time Frame

• If you adhere to the principle that IRAs should be used to invest for retirement, you'll need to wait until you turn age 59 1/2 to withdraw Roth IRA money or face, in most cases, a 10-percent tax penalty on all earnings you access. As of March 2011, the IRS uses 59 1/2 as its retirement age for IRS purposes. With a Roth, you must also have held your account for a minimum of five tax years to avoid paying a penalty on withdrawals, even ones taken during retirement.
  
  

Tax Penalty

• If you take a Roth IRA distribution outside of retirement or before you have held your account for five years, the IRS charges a 10-percent tax penalty in addition to regular income tax on the earnings portion of the withdrawal. Uncle Sam never taxes original Roth contributions, regardless of timing or circumstance. You already paid tax on that money prior to investing it.
  
  

Exceptions

• IRS Publication 590 outlines several instances where the IRS waives taxes on early Roth withdrawals. For instance, the IRS does not charge any tax -- regular income tax or the 10-percent penalty -- if you take Roth money after becoming disabled, to fund up to $10,000 worth of first-time home buyer expenses, or if the cash is paid to your estate or one of your IRA beneficiaries after you die. In other early withdrawal cases, you pay regular income tax but not the 10-percent penalty. Examples include using Roth money to pay for higher education expenses or certain medical-related costs.
  
  

Considerations

• When you go to access Roth money early, you do not have to tell the financial institution where you keep your account what money to take out. The IRS orders Roth distributions. This means that the IRS counts original contributions first, which do not trigger tax implications. Once you remove all original contributions, taxable proceeds, including accumulated earnings, come out. You must pay the appropriate taxes on these amounts.