What is the latest day I can withdraw funds from my Roth IRA to use for closing costs of my first home?

by Ibolya Balog, CPA | Jan 04, 2019

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.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: Ibolya Balog, CPA, is an associate professor at Cedar Crest College in Allentown, Pa.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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