Reaching into your Roth early is never ideal, but it may be the solution that keeps the rest of your retirement plan intact and moving forward.
2. Take tax-free withdrawals
Qualified retirement withdrawals from your Roth IRA are tax-free. On paper, that’s an advantage when you expect your tax rate in retirement to be higher than it is today. In practice, having a source of tax-free retirement income also has emotional benefits. You’ll be less affected by tax changes, budgeting for living expenses will be easier, and you’ll have some power to manage your tax bill by pulling more or less from your taxable accounts in a given year.
Normally, you can start taking tax-free withdrawals of contributions and earnings from your Roth after the age of 59 and a half. There is an additional requirement that at least five years must have passed since your first Roth contribution.
3. No effect on taxability of your Social Security
The IRS taxes between 0% and 85% of your Social Security benefit. Where you fall in that range depends on your “combined income” for the year. Combined income is half of your Social Security benefit plus other income, including taxable retirement distributions, wages, interests, dividends, and capital gains.