What Are the Ramifications if I Close My Roth IRA Account?

by Allison Westbrook

A Roth IRA is a savings and investment account designed to help you stash money away for retirement. However, should you decide to close the account – perhaps due to the establishment of a 401k through work or a need for emergency cash – prepare yourself for the financial ramifications that could reduce your nest egg.


When you contribute to a Roth IRA, you make savings deposits with taxable income. However, once the money is in the account investment earnings aren't taxed. As with all IRAs, you may not take distributions from a Roth IRA until age 59 ½ in order to take full advantage of the account’s tax benefits.

Early Distributions

Taking an early withdrawal from your Roth IRA results in a 10 percent tax penalty on any earnings on top of regular income tax. Unlike a traditional IRA, in addition to being age 59 1/2, your Roth IRA must have been open for five years, starting from January 1 of the year in which you made the first contribution. The IRS will not tax or penalize an early withdrawal on the amount of your original contribution.


Once you meet the requirements for tax-free withdrawals, you may close your Roth at any time without incurring taxes. However, once the money leaves the tax-sheltered Roth IRA, any income earned by investing that money will be taxed. Choosing, instead, to leave the money in the account and take distributions means the money will grow tax-free until you need it. In fact, you may continue making contributions to your Roth IRA for life – a benefit unavailable with traditional IRAs, and you are never required to make minimum withdrawals.


If you wish to close your Roth IRA because you need short-term cash, consider taking a rollover from the account. The IRS allows you one rollover per year penalty and tax-free so long as you deposit the money into the same or another Roth IRA within 60 days of the withdrawal. You can use the money however you wish during that 60-day period, but the rollover will count as a distribution if you fail to repay it in full and on time. On the other hand, if you need the money in your Roth IRA to pay for college, purchase your first home or because you are recently disabled, you may withdraw the money penalty and tax-free without repaying the money to the account.

About the Author

Allison Westbrook is an experienced writer of three years with a passion for creating relevant articles for a wide readership. She attended Kilgore College and majored in English. Allison's articles have appeared on such websites as eHow and Trails.com. Her reflective writing angles deliver focused and consistent content.

Photo Credits

  • Creatas/Creatas/Getty Images