Unlike with a traditional IRA, the CalSavers IRA has no requirement for withdrawing funds by a certain age or at a certain time. Employees can also make their accounts available to one or more designated beneficiaries. So they can let their assets grow tax-free for as long as they like.
But, if needed, employees can withdraw funds at any time, by submitting a request via the CalSavers website.
- If they meet the criteria for a qualified distribution, there are no taxes or penalties. This means withdrawing only what they've contributed, and not withdrawing interest earned.
- If they do not meet the criteria for a qualified distribution, they must include earnings in their income for the tax year.
- If they withdraw before age 59½ by requesting a nonqualified distribution, there is a 10% penalty tax charged by the IRS on the earnings portion of their distribution.
They can also transfer their CalSavers balance at any time, to any other established Roth IRA.
Another transfer method is distribution. This means that funds are first distributed to the employee, who then has 60 days to roll over the funds to another established Roth IRA.
Keep in mind that the IRS limits everyone to one IRA rollover in any 12-month period.