Biggest Retirement Mistakes Retirees Must Avoid

37. Withdrawing Your Roth IRA Too Soon

A Roth IRA is one of the greatest ways to save for retirement because of the magic of compound interest. Compound interest is interest gained from the initial principal, including any interest that has been gained during previous periods. Look for a compound interest that uses more frequent compounding periods for you to accrue the most gain. With this established, your compound interest should start to snowball over time, growing exponentially with each compounding period.

However, if you withdraw your money too soon, you may end up paying much higher taxes than if you waited. That is because taxes are focused on how much you have, not how much you’re going to have in the future. It can put a drain on your resources. The minimum wage required for someone to take money from their Roth IRA without penalty is age 59 and a half. If you want to know more about distributions and how withdrawals work, check out this in-depth guide by H&R Block.