Roth Disbursment

[Guest 4thebrdz]

I started a Roth some years ago with $2k. The stock was a loser and the value now is $1200.

Question- Can I take the $1200 out without penality?

I was under the impression that the monies contributed to a Roth being taxed already would available at any time. Only the monies above the contribution would have to stay in the account.

Am I wrong?

Thanks

Paul

[John G]

You can always take out contributions to a Roth IRA at any time. Your understanding is correct.

Some additional comments:

1. Why close your account? You have a viable tax shelter. Why not keep it?

2. It is extemely rare for a tax payer to be able to take a write off for a tax loss like this.

3. Stock? I would not recommend someone to open a Roth a buy a single stock or even two stocks. No diversification. Not very efficient.

4. You actually bought a stock mutual fund? OK, ignor comment #3. The last five years have been tough in the stock market. The dot.com crash was nasty. We had three down years out of 5, an extremely rare event. Normally good years out number bad by 4-6 to one. Some of newer investors may be getting heartburn.

But, 5 years is a short time period in investing. The average retirement investor will be investing for decades. You just paid $800 tuition in the school of hard knocks. What lessons have you learned? I can think of a few. Diversification helps manage risks. Stock markets don't go up all the time. But, when you invest in stocks you are backing capitalism, growth, a better future, etc. compared with "zero risk" CDs and other IOUs.

Join me on a historical digression about the Dutch in NYC:

"It was under Stuyvesant, in 1653, that the town was formally incorporated as a city....

The struggling days of pioneer squalor were over, and New Amsterdan had taken on the look of a quaint little Dutch seaport town, with a touch of picturesqueness from its wild surroundings. As there was ever menace of attack, not only by the savages but by the New Englanders, the city needed a barrier for defense on the landward side; and so, on the present site of Wall Street, a high, strong stockade of upright timbers, with occasional blockhouses as bastions, stretched across the island. Where Canal Street now is, the settlers had dug a canal to connect the marshes on either side of the neck. There were many clear pools and rivulets of water; on the banks of one of them the girls were wont to spread the house linen they had washed, and the path by which they walked thither gave its name to the street that is yet called Maiden Lane. Manhattan Island was still, for the most part, a tangled wilderness. The wolves wrought such havoc among the cattle, as they grazed loose in the woods, that a special reward was given for their scalps, if taken on the island."

[ http://www.bartleby.com/171/3.html ]

Wolves in Manhatten! And this kind did not whistle from construction sites.

The historical legend is that Stuyversant's son convinced dad to surrender to the British because as mechants they made money regardless of who owned Manhatten. Wall Street was created in a time when wolves were as much a threat as terrorism British.

Buying stocks and owning stock mutual funds is buying into growth, a better future (bulls and bears rather than wolves!), invention, productivity, etc. Some of the reasons why we don't wear wooden shoes and own blunderbusts.

[Guest 4thebrdz]

John G- Thanks. The Roth money is going into my regular IRA account so I can lower my adjusted gross on the IRS taxes.

Paul

[John G]

Whoaaa Nellieeee.

Run that by us again! Why would you kill a great tax shelter to knock a few dollars off this years tax return? Please give us some additional details - current income, federal tax rate, state tax rate, current age, expected retirement age, etc.

I can not think of a circumstance where I would do what you propose.