Withdrawals

Taking Money When You Need It

You can withdraw money from your Illinois Secure Choice account by requesting a distribution.

While the program is meant to help you save for retirement, we understand that life’s unexpected moments sometimes come with a price. What you do with your savings is entirely up to you, and the money you save is available to you if you need it in an emergency.

Moving Your Money

A Roth IRA also allows you the flexibility to move your money if you decide your savings isn’t where you want it to be.

If you’d like to move the savings in your Illinois Secure Choice Roth IRA, you can transfer or roll your balance to an established Roth IRA at a different financial organization at any time. Simply submit a request for a transfer on the Illinois Secure Choice web portal for your Roth IRA to be sent directly to your new financial organization for deposit in your established Roth IRA.

Alternatively, you can request a distribution of your Illinois Secure Choice Roth IRA using the Distribution Request form. The funds will be distributed to you, and you’ll then have 60 days to roll over your money to your established Roth IRA with your new financial organization.

Keep in mind that the IRS limits you to one rollover in any 12-month period. This one-rollover-per-year limit applies to all of your IRAs (both traditional and Roth IRAs).

 
No Pressure to Withdrawal

Keep in mind, while your money is always available when you need it, you don’t need to take money out at any time. Unlike traditional IRAs, you aren’t required to take minimum distributions (RMDs) from a Roth IRA when you reach a certain age. If you don’t need the money, you can let your assets continue to potentially grow tax-free for as long as you like.

In addition, if you don’t withdraw your Roth IRA assets before you pass away, you can leave the account to anyone by designating one or more beneficiaries. Your beneficiary would have the option of taking a lump-sum distribution or receiving payments from the account over a number of years (subject to the required minimum distribution rules that apply to beneficiaries). The money would be available to your beneficiary tax-free as long as five years have passed since the first year you contributed to the Roth IRA.

Since Illinois Secure Choice is a Roth IRA, distributions from your account will be subject to taxation in accordance with applicable federal tax rules.

Qualified Distribution Requirements

Roth IRAs must meet two requirements for you to take a tax- and penalty-free “qualified” distribution:

A five-year holding period must have passed before the distribution for each Roth IRA you own. The five-year holding period begins on January 1 of the year in which you make your first contribution or conversion contribution to any Roth IRA you own (including your Illinois Secure Choice account) and ends December 31 of the fifth consecutive tax year thereafter.


AND

The distribution is made on account of one of these four qualified reasons:

  • You’ve reached age 59½
  • You have a qualifying disability
  • Your beneficiaries are taking a distribution following your death
  • You take the funds to pay first-time homebuyer expenses (up to $10,000)

Non-Qualified Distributions

A Roth IRA distribution that doesn’t meet both of the qualified distribution requirements is a “non-qualified” distribution. Whether it’s subject to taxes and penalties depends on what types of monies are being distributed.

Any amounts you’ve contributed (with the exception of certain “conversion” contributions) that are being returned to you will be distributed tax and penalty free; however, the earnings on your account that are distributed may be subject to taxes and penalties. Earnings are only distributed after all the contributions you made have already been removed, so you can avoid exposing yourself to taxes and penalties by only removing amounts that you’ve contributed.

Contributions

come out first, tax and penalty free

Conversions

pay income tax on contributions

Earnings

subject to taxes and penalties

There is a set order in which contributions and earnings are considered to be distributed from your Roth IRA. In applying the ordering rules, you must:

  • Aggregate all Roth IRAs you own
  • Aggregate all distributions made during the year
  • Disregard excess Roth IRA contributions and related earnings
  • Disregard rollover contributions from other Roth IRAs.

It’s important to note that non-qualified distributions will have an impact on your retirement – any amount you take out now could mean less in retirement. If you have questions about withdrawing money from your Illinois Secure Choice Roth IRA or the taxation of such a distribution, we recommend speaking with a qualified tax advisor.

Precautions and Penalties

If you take money out of your Illinois Secure Choice Roth IRA and you don't meet the criteria for a qualified distribution, you have to include the earnings in your income for the tax year.

If you take money out of your Illinois Secure Choice Roth IRA before you turn age 59½ by requesting a non-qualified distribution, there is a 10% penalty tax charged by the IRS on the earnings portion of your distribution.

Early Distribution Penalty Exceptions

There are early distribution penalty exceptions that allow you to avoid the penalty tax:

  • Age 59 ½ or older
  • Death
  • Disability
  • Substantially equal periodic payments
  • Certain medical expenses 
  • Health insurance if unemployed
  • Higher education
  • First time homebuyer
  • IRS levy
  • Qualified reservist status