Early Roth withdrawal

[Guest Earl Baker]

I had a traditional IRA that I rolled over

from a 401k in 1993. I did nothing with

the account until late 1998, when I converted

it to a Roth and made a $2000 contribution.

I paid the taxes the following year in full.

At the peak of the market the account was

worth nearly 10,000 dollars but now is about

65% of that and losing ground steadily.

I am heavily in debt and need to withdraw

the account.

I've been trying to read up on the parameters

and it's very confusing. It seems to me

that I should not owe tax, just the 10%

penalty. After calling my broker who was

virtually no help! and reading the IRS

pubs, I am still not clear. Do I have it

right? What about the 5 year rule on

contributions, does it apply in this case?

Earl Baker

[BPickerCPA]

If you terminate your Roth at this time, you can remove $2,000 without penalty since that represents your annual contribution. Anything above that will be subject to the 10% penalty.

You may be entitled to an itemized deduction for the decline in value.

This assumes that what you mentioned is the sum total of all roth contributions and conversions, and you completely terminate your roth account.