I am confused (obviously) about terminating my Roth IRA. I have had the money in, successively, a CD, a DRIP, and a mutual fund starting in 1999. The first made a little interest and the last two lost big, meaning my total current holdings are far less than contributions. I am not 59 1/2 yet.

Am I right in thinking I can cash out with no tax penalty? Some people I've asked say it has to be in 5 full years regardless.

Sorry if this is an elementary question. Thanks for your help

It depends. If the only contributions you made are annual participant contributions, and you have no earnings on your contributions, then your distribution will be tax and penalty free.

If the amount in your Roth IRA is from conversions from traditional IRAs, then you may owe a 10 percent early withdrawal penalty on the amount ( since it has been less than five-years sicnce you converted the assets), unless you meet an exception.

Check out the following link for information on deducting IRA losses


http://www.benefitslink.com/mbmirror/12458.html

I have a question for you. Why?

You did not mention amounts, the magnitude of loss and why you want to take the money out. If your reason is that you want to take a tax loss, then the issue gets much more complicated and often it just doesn't work out. This topic has come up a lot on this message board. You can search under Roth Tax Loss and see a number of threads. Here are some you should read, especially the read the Motley Fool article.

http://www.benefitslink.com/mbmirror/12458.html

http://www.fool.com/taxes/2002/taxes020222.htm