Roth IRA Distributions

[Guest r402070]

I'm I allowed to withdraw up to my basis without incurring a 10%

Penalty.

Example: I have a Roth that is three years old. I have made three contributions of $2,000 and the current balance is $6,600. I want to withdraw $6,000. Does this avoid the 5 Year rule?

Thanks.

[papogi]

For distributions from Roth IRA's that are owned less than 5 years and whose owner is under 59 1/2, earnings are taxable. Also, the amount that represents up to your basis would be subject to the 10% penalty unless the money is used for one of the qualifying expenses (e.g., first time homebuyer, higher education, health insurance premiums for unemployed, medical expenses exceeding 7.5% AGI, and a few others).

[BPickerCPA]

Money contributed as annual contributions can be withdrawn at ANY time WITHOUT the 10% penalty. Papogi's statement to the contrary is erroneous.

[John G]

You defeat the purpose of a Roth tax shelter if you start dipping into the funds. Have you considered a home equity loan, borrowing from a relative, deferring a purchase to a later date, taking a weekend job, etc.

I would sure think long and hard before busting up a great tax shelter. It is hard to stuff money into a Roth because of the income requirements, limit to $3k per year.... and remember, Congress could change the rules and you might not be eligible in the future.

[papogi]

Sorry for my response above which was indeed incorrect. The last thing I like to see on message boards is answers from people who just want to hear themselves speak, while offering no useful information. It was not my intent to be in that number. Sorry for the error.