Seeking Clarification on Roth IRA Withdrawal

[Guest wdb]

Originally posted in general category, before I found the Roth IRA page...sorry for the double post...

Hello,

I did a search of these boards and found some information, but nothing that I considered definitive. My exact question is this:

If my Roth IRA (opened in 2000), is currently valued less than my contributions over the past four years, will there be a penalty if I withdraw from it or close it?

My understanding is that since all of my contributions were already taxed, they are not taxable. The thing I am not sure of is the penalty...does early withdrawal incure a penalty, even if it is only from my contributions?

There has been no rollover, conversion, dividends, etc....just my straight monthly contributions. And even if I close it, I am taking about a $1k loss compared to what I contributed.

I ask here because of conflicting information I am getting from my agent and my funds custodian.

Thanks in advance for any help,

bill

[Appleby]

No. The withdrawal will not be taxed, if the assets consists of only regular Roth IRA contributions. If you withdraw the full balance, you may be able to deduct the losses on your tax return. See IRS publication 590 at http://www.irs.gov/pub/irs-pdf/p590.pdf HTML version at http://www.irs.gov/publications/p590/index.html

[Appleby]

Also...see John G's comments at http://benefitslink.com/boards/index.php?showtopic=24343

[Guest wdb]

Thanks Appleby. What about the 10% potential penalty aside from the taxes? And yes, I understand the serious decision of removing funds from, or closing, a

Roth...acquiring additional debt is not an option at this time...although I do appreciate the insight...bill

[Appleby]

No penalty would apply.

One of the general rules for applicability of the 10 -percent additional tax(early distribution penalty) on IRA withdrawals is that if federal tax does not apply, then the penalty does not apply