Ok, I'll keep this one simple. Last year at jazz wealth we had a total of 1488 scheduled calls. Some calls turned into business, some turned into a 15 minute education session, and others turned into nothing. If you are thinking of working with us here at jazz wealth or just have some questions you can always schedule a call. We're happy to help! As you may know, at jazz wealth we are all kinds of geeky and love the stats of everything from retirement investing to general market facts. One of the things we track is the types of questions we get and how often they are asked.
One frequent question people had was about the 5 year rule on a Roth IRA. One of the reasons we like working with the Roth IRA for most clients here at jazz wealth (aside from the tax free growth) is that you can take out your contributions anytime you like with no tax or penalty. For example, let's say you took added $1,000 last year and then contributed $2,000 this year. For some reason, you need to take out $1000 this year. Could be that you ran into some financial troubles or emergency and had no other options. Since you made a total of $3,000 in contributions you could take that $1,000 out and suffer no penalty or tax unlike the other types of IRA's. The reason is simple, you contributed that money after tax meaning the IRS has already been paid. For this reason, since your tax obligation has already been met, the IRS is ok with this transaction.
Many people mistakenly think you must wait 5 years before taking out any contributions and that is simply not the case. When a client at jazz wealth needs to take a withdrawal we let them know how much they can take out before incurring any penalty or tax.
The 5 year rule refers to those that are close to the qualified distribution age of 59.5. This is the age you can take out any money in your Roth IRA (growth and contributions) without any tax or penalty. The catch here is that when you turn 59.5, if you want to take out any growth you must have had the Roth for at least 5 years leading up to the qualified withdrawal. For example, let's say you open a Roth IRA this year and you are 57 year of age. When you turn 59.5 (or anytime prior to this) you can certainly take out your contributions BUT you would need to wait 5 years until you could touch the growth. In this example, the year in which you turn 62 would be the first year you could withdrawal contributions as well as growth with no tax or penalty.
Jazz wealth is a teaching firm. Not only do we manage clients investments for them using our expense free funds but we also teach on a weekly basis in live classes as well as our recorded sessions that are always available on demand. If you want to work with an SEC registered, Fiduciary advisor keep us in mind here at jazz wealth.