I am considering using the funds in my Roth IRA which has been open for more than five years for the closing costs of my first home purchase. I wanted to know what is the latest day I can withdraw my funds to use for closing costs? For example, if my closing date was Jan. 28, 2019, and the funds clear into my account on Jan. 29, 2019, would that be OK? I have more than enough saved for my closing costs, so I wouldn’t need them before Jan. 28.
You should ask your realtor to verify what the settlement agent’s time requirements are. They may require the funds to be available a certain number of days before settlement. Another consideration is to verify with the custodian of the Roth IRA what the processing time will be. Will the disbursement be sent via check or wire transfer? For a distribution in the form of a check, mailing time needs to be considered as well as how many days the bank takes to clear the check. Out-of-state checks and larger-dollar-amount checks may take longer to clear. To set up a wire transfer, the Roth IRA custodian will require prior set-up of the bank account to send the distribution. That may require paperwork to be submitted, and may need additional verification.
I would encourage you to take the above steps that need to be completed before the actual distribution takes place, and to include some time for unanticipated processing delays to ensure a smooth transaction.
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Answered by: Ibolya Balog, CPA, is an associate professor at Cedar Crest College in Allentown, Pa.