Stock Dividends In A Roth

[Guest otherhess]

I AM 45 AND RETIRED ON DISABILITY, I CAN NO LONGER CONTRIBUTE TO MY ROTH BECAUSE MY ONLY INCOME IS MY PENSION AND STOCK DIVIDENDS. I HAVE SOME STOCK IN MY ROTH THAT PAYS DIVIDENDS IS IT O.K. TO LET THOSE ACCUMALATE IN MY ROTH OR IS THAT CONSIDERED A CONTRIBUTION? ALSO ARE THESE DIVIDENDS TAXABLE OR TAX FREE IF THEY ARE IN A ROTH IRA?

[John G]

Dividends, interest, short term capital gains and long term capital gains - there are no distinctions in either a Roth or a regular IRA. The transactions that occur during the year has no impact on your tax return. There is no tax impact when you take normal distributions in retirement from your Roth.

[Appleby]

John G- do you mean “qualified distributions” and not normal distributions?

Since technically, a normal distribution (one taken on or after age 59 ½) of earnings could be subjected to ordinary income taxes, but a qualified distribution, one take at least five years after the Roth IRA is established and either when the participant is at least 59 ½ years; due to disability, to beneficiaries after the death of the IRA owner, or up to $10,000 to use towards the purchase of a first home, is always tax and penalty free

[John G]

"normal" - lay persons concept, as in distributions in retirement are normal, other kinds of distributions would be "unusual"

The original post did not suggest any desire to take funds out, so I responded relative to "normal" circumstances. The question was if they were taxable "if they were within a Roth" - the answer within a Roth is clearly no.

Consulting a tax professional or accountant is always desireable because the posting part may not be explaining the problem correctly or may have unusual circumstances that make a difference.