Many Roth Questions

[Guest Doc42]

Questions:

1. Can I withdraw Roth IRA contributions at any time for any reason without penalty?

2. When I retire I will probably rollover my employer 401K to a traditional IRA. To convert this to a Roth IRA my adjusted gross inome will have to be below $100,000. Correct?

3. Why does the government insist on making this so difficult (income limits and way too many rules for too many products)? Are there significant changes on the way?

Thank you for your time. Doc42

[Guest Doc42]

I just thought of one other question I have.

What would happen if I contribute to my Roth throughout the year and then at the end of the year I figure out my income is over the IRS limits? Is it true that I can either 1. recharacterize the monies contributed that year to the Roth as a traditional IRA or 2. contact my IRA custodian and advise them I went them to return that years contributions because I am ineligible to contribute to a Roth that year? Is this all correct? Thank you.

[JanetM]

You answers can be found in IRS pub 590 that discusses the IRA and Roth IRA.

[John G]

You can withdraw contributions at any time without penalty. No recommended as it defeats the purpose of a tax shelter, but the penalty free withdrawal is an option.

Roth conversion rules could easily change in future years.... you can't count of the rules remaining unchanged more than one year at a time. More than five years down the road and you probably have less than a 50% chance that the same rules are in place.

Why so difficult? Because Congress is essentially acts like a committee with 400+ participants. There are very few economists or business people in Congress. There is a huge number of lobbiest and special interest groups in Washington that thrive on making things more complex, and no opposing Jimmy Stewart character willing to stand up and insist on simplicity. {I know you already knew this}