Retirement Investing

¹ For Traditional IRAs — If you withdraw before age 59 ½ you may be subject to a 10% early withdrawal additional tax unless one of the following exceptions apply: qualified higher education expenses; qualified first home purchase (lifetime limit of $10,000); certain major medical expenses; certain long-term unemployment expenses; disability; or substantially equal periodic payments.

For a withdrawal from a Roth IRA to be federal (and, in most cases, state) income tax free, it must be considered qualified. There is a five-year holding period when determining whether earnings can be withdrawn tax-free as part of a qualified distribution from a Roth IRA. This period begins January 1 of the tax year of the first contribution or the year of conversion to any Roth IRA. The distribution must be made after the five-year holding period, and the individual must have reached age 59 ½, be deceased, disabled or use the funds for a first-time home purchase (lifetime limit of $10,000). There is a 10% additional federal income tax for non-qualified withdrawals of earnings taken before age 59 ½, unless one of the following exceptions apply: qualified higher education expenses; qualified first home purchase (lifetime limit of $10,000); certain major medical expenses; certain long-term unemployment expenses; disability; or substantially equal periodic payments. A special provision applies for converted assets. If a non-qualified withdrawal is made within five years of the conversion, the earnings withdrawn will be subject to income tax, and the entire withdrawal may be subject to an additional 10% federal income tax unless an exception applies.

Neither Merrill Lynch, Pierce, Fenner & Smith Incorporated nor any of its subsidiaries are tax or legal advisors. We suggest you consult your personal tax or legal advisor before making tax or legal-related investment decisions. Merrill Edge is the marketing name for two businesses: Merrill Edge Advisory Center, which offers team-based advice and guidance brokerage services; and a self-directed online investing platform. Both are made available through Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S).