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Roth IRA question

Old 11-14-12, 03:27 PM
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Roth IRA question

Hi all,

I opened up a Roth IRA a year or so back with Scottrade. Over a year so, I would periodically add a few bucks here and there to it. I think it has around $1500 or so in it now. Other than those deposits, it has just sat there. I never did anything other that make the deposits.

Are there any implications to pulling out that entire $ amount right now? We're in the process of moving, and it would come in handy at the moment for some oddball expenses rather than sitting in an IRA that I opened on a whim.

I'm under 59 1/2... I know there are some implications when withdrawing from a Roth under that age, but I haven't made any earnings on what I put into it, so I wasn't sure if that applied to me or not.

Thanks for any help,
slappy
Old 11-14-12, 03:46 PM
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Re: Roth IRA question

Try googling it, but here is what I recall when I did it. You would end up paying tax on any gain. I did it because I was able to pay off a mortgage and after a few years with the ROTH, I was good enough to have no gain, so it cost me nothing. Seems like there is some special form, though. Something like an "unqualified distribution" or something.
Old 11-14-12, 03:48 PM
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Re: Roth IRA question

Looking it up, it appears there is a 10% penalty for an unqualified distribution, plus taxes on the gain. So I likely paid that 10% figuring it was worth it at the time.
Old 11-14-12, 04:03 PM
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Re: Roth IRA question

Thanks, kvrdave. I was seeing some things about that online, but just didn't have a good handle on it. I'm also seeing this online:

"Your ROTH IRA withdrawal will be tax free if: You withdraw just the amount of your original contributions, regardless of your age."

So it's looking like I'll be ok pulling out my contributions in full, maybe. Nothing taxed, and no penalty since I'm not touching earnings (which are non-existent in this IRA).

At least if I'm understanding things correctly...

EDIT: Reading more, and a little unclear still... So, does the 10% penalty for unqualified distributions only take effect only if I'm pulling out earnings, or also if I JUST pull out contributions?

Last edited by slappy; 11-14-12 at 04:06 PM. Reason: additional question
Old 11-14-12, 04:11 PM
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Re: Roth IRA question

The Roth principle was taxed money when you put it in. You may withdraw up to the principle at any time. The penalty only applies if you withdraw earnings.
Old 11-14-12, 05:28 PM
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Re: Roth IRA question

Okay, that makes sense. I didn't remember paying a penalty, but I didn't have any gain.
Old 11-14-12, 05:51 PM
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Re: Roth IRA question

Originally Posted by OldDude View Post
The Roth principle was taxed money when you put it in. You may withdraw up to the principle at any time. The penalty only applies if you withdraw earnings.
Great! Thanks to the both of you.
Old 11-14-12, 08:52 PM
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Re: Roth IRA question

Don't know for sure, but I believe about 7 years ago; you had to have the ROTH for at least 5 years. If withdrawn before 5 years, then you would still be penalized.
Old 11-15-12, 11:59 AM
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Re: Roth IRA question

I'm in the retirement plan business, but it's been about 7 years since I've worked with ROTH IRAs. From my memory, and the below link seems to confirm this, you will have a 10% penalty, unless you meet one of the conditions listed.

http://www.irs.gov/taxtopics/tc557.html
Old 11-15-12, 05:23 PM
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Re: Roth IRA question

Originally Posted by Mikael79 View Post
I'm in the retirement plan business, but it's been about 7 years since I've worked with ROTH IRAs. From my memory, and the below link seems to confirm this, you will have a 10% penalty, unless you meet one of the conditions listed.

http://www.irs.gov/taxtopics/tc557.html
Check out this text from that link:

"The 10% additional tax applies to the part of the distribution that you have to include in gross income."

I'm not a tax professional, but I think you can withdraw what you've put it at any time with no penalty. I bet the people who are holding this money for the OP would know exactly what the rule is.
Old 11-18-12, 08:30 PM
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Re: Roth IRA question

Pretty sure you can withdraw your CONTRIBUTIONS at any time. If you start withdrawing more, then you'll be penalized.

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