early withdrawal of a roth for home purchase

[Guest dr.ic]

I am a 28 yo med student interested in opening up a roth. I would also like to purchase a home down the road. I understand that 10,000 is withdrawable, but the roth owner must be a first time homeowner. Does anyone have the precise definition of first time homeowner?

[John Olsen]

The following, from National Underwriter's "Advanced Sales Reference Service", may be helpful.

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A “qualified first-time homebuyer distribution” is defined as any payment or distribution that is used within 120 days after the day it was received by the individual to pay the qualified acquisition costs of a principal residence of a first-time homebuyer. IRC Sec. 72(t)(8)(A). The aggregate amount of payments or distributions received by an individual from all Roth and traditional IRAs which may be treated as qualified first-time homebuyer distributions is limited to a lifetime maximum of $10,000. IRC Sec. 72(t)(8)(B). The first-time homebuyer may be the individual, his spouse, any child, grandchild, or ancestor of the individual or his spouse. A first-time homebuyer is further defined as an individual (and, if married, such individual’s spouse) who has had no present ownership interest in a principal residence during the two-year period ending on the date of acquisition of the residence for which the distribution is being made. IRC Sec. 72(t)(8)(D)(i), as added by TRA ’97. The date of acquisition is the date on which a binding contract to acquire the residence is entered into or the date construction or reconstruction of the residence begins. IRC Sec. 72(t)(8)(d)(iii), as added by TRA ’97. Qualified acquisition costs are defined as the costs of acquiring, constructing or reconstructing a residence, including reasonable settlement, financing, or other closing costs. IRC Sec. 72(t)(8)©

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John L. Olsen, CLU, ChFC

Olsen Financial Group

St. Louis, MO

314-909-8818

[Guest dr.ic]

Thank you so much for your precise answer. If I understand correctly, although I may own real estate, I may still take the $10,000 withdrawal if the house is under my wife's, child's, or any other ancestor's name. Please correct me if i am wrong. the situation is such that I am currently part owner, with my father, of real estate. I am pondering opening a roth, but may wish to use the money in the Roth to buy a home down the road. According to this rule, i think it would be legal to buy the home in my wife's name and still withdraw $10,000 tax free.

I have another question. If I invest $2000 for 5 years into a Roth. Can I then withdraw $10,000 at the end of five years without a penalty, as long as the gain on the yearly contribution stays in the Roth.

thank you in advance for the time spent answering this question

[Guest dr.ic]

Thank you so much for your precise answer. If I understand correctly, although I may own real estate, I may still take the $10,000 withdrawal if the house is under my wife's, child's, or any other ancestor's name. Please correct me if i am wrong. the situation is such that I am currently part owner, with my father, of real estate. I am pondering opening a roth, but may wish to use the money in the Roth to buy a home down the road. According to this rule, i think it would be legal to buy the home in my wife's name and still withdraw $10,000 tax free.

I have another question. If I invest $2000 for 5 years into a Roth. Can I then withdraw $10,000 at the end of five years without a penalty, as long as the gain on the yearly contribution stays in the Roth.

thank you in advance for the time spent answering this question