The first drawback is the ten percent IRS tax penalty. You need to make sure that you really need the funds before you make any withdrawal to avoid a Roth IRA withdrawal penalty. You cannot put the funds back after you’ve removed them. There are some approved withdrawals that are exempt from this tax penalty. However, any withdrawal you make whether or approved or not will result in the decrease of your Roth account.

The second drawback is the income tax charged by IRS for the removal of funds. This is different from the tax penalty as that is a standard ten percent. You pay taxes based upon your income tax rate. Any additional income that you might incur can cause an increase and raise you towards a higher tax bracket. If you needed the funds for a specific purpose you might end up using some of your Roth withdrawal towards your income tax. This will defeat the purpose of your withdrawal in the first place.

The third drawback of a Roth IRA withdrawal is the loss of future retirement growth. Time is not on your side. You can never recoup time or the financial benefit of the money that you remove. If you only have a few years left before you can actually retire your actions can be extremely detrimental. If might even push out when you can retire as you might not have enough funds to live on.

As you can see a Roth IRA withdrawal can prove to be harmful towards your financial retirement future. You want to make sure that any decision that you make shouldn’t be taken lightly. The IRS tax penalty, income taxes paid and loss of future earnings are the drawbacks that you can receive if you make a Roth IRA withdrawal.

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To begin with it is almost always good practice to avoid paying early withdrawal penalties.  The key being that if you take out more than what you put in (often times referred to as the “principle” that you put into the account as time went on) you are subject to a penalty of 10% if taken before the age of 59 and one half.  So in general there had better be a pretty good reason to be taking a withdrawal from your Roth account before you reach that milestone age.

Now that we have that taken care of, it is time to focus on that exact timing past age 60 to being withdrawing.  No matter if you found the best Roth IRA online or not, it is important to note that you will not be taxed on any of the money that you withdraw after that ripe age.  This is important to note when you began withdrawing funds from your other retirement accounts.  If at all possible try to keep yourself out of certain tax brackets by taking money out of your Roth to stay below these limits.  In other words, if you are on the precipice of entering the 25% federal tax bracket, but could take money from your Roth and remain in the lower tax bracket you should go that route.

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