ROTH IRA

[Guest mke08]

just over a year ago, I foolishly allowed myself to be manipulated into a roth. since that time I have retired early ( age 52) from chrysler corp. there is approx: $3400 in account I need to access these funds and feel that I should not pay a penalty $100 fee plus 10 percent. need help.

[jevd]

Fees are a matter of the contractual agreement you signed when you set up the account. Generally speaking you may withdraw contributions (basis) from a ROTH IRA without taxation. Any earnings are subject to taxation and because your under 59 1/2 subject to a Federal 10% premature distribution penalty. Some states also have additional penalities ( CA. for one) If you are in a bank CD, early withdrawal penalities may apply which would reduce the taxable income. You did not state what type of investments you have or the type of organization you set your plan up with. You may be able to negotiate fees or make arrangements with the individual advisor who may have sold you the plan.

Additional information may be found in IRS Pub 590 Here

[John G]

Gees, I wonder where you have placed these funds and who is giving information.

1. You can withdraw all contributions from a Roth at any time without a tax consequence. There is no 10% penalty as far as the IRS is concerned, nor any taxation on the contributions. You might have to pay tax on the earnings if they exceed your original contributions ~ which probably isn't the case.

2. You can rollover a Roth, directly from one custodian to another, at any time. Often the receipient will reimburse you for any fees that the first custodian wants to stick you with.

3. There may be rules governing the actual investments you own: CD terms, early exit clauses, back end loads on mutual funds. If this is the case, try to appeal to them based upon your circumstances. Many companies will void special fees if customers just ask. Some have exceptions for folks that lose their jobs for example, or change employers.

4. If you close out all of your IRA/Roth accounts (not just cherry pick a few) and can show a net loss, you can claim that loss on your tax returns. Its a little complicated, but if this is your absolutely only IRA/Roth, you may be able to write off a loss if your exit dollars are less than your original contribution.

If all of the above fail to address your specific issue, post again. Maybe we missed something unique to your situation.

You will find that most public libraries have a range of books for the layperson on how to invest, buy mutual funds, open a Roth, etc. If you read something in three different books, its probably correct. You learn a lot by reading and can avoid the common biases of the marketing side of brokerages, banks and funds.

Everyone involved in investing tends to have a "what were you thinking" story. Me too.

[Guest mke08]

I AM IN A ROTH IRA BROKERD THROUGH RAYMOND JAMES. THESE ARE MUTUAL FUNDS. I AM NOW SEMI-RETIRED FROM CHRYSLER CORP. (AGE 52) THERE IS APPROX: $3400 IN ACCOUNT. CONSIDERING MY SIGNIFICANT DROP IN INCOME, ALL CONTRIBUTIONS HAVE CEASED AND WILL NOT RESUME. THE REP. FROM RAYMOND JAMES STATED THAT IF I CLOSE OUT THE ACCOUNT I WOULD HAVE TO PAY $100 FEE, PLUS A 10 PERCENT TAX PENALTY. I DON'T MIND SO MUCH THE $100 FEE, BUT NEED TO FIND A WAY AROUND THE PENALTY. CAN I PLEAD HARDSHIP? NEED OPTIONS. ANYONE AND EVERYONE, FEEL FREE TO CHIME IN.

[jevd]

Roth Contributions are after tax contributions. When withdrawn there is no tax. As you are under 59 1/2 there would be tax on the earnings and a 10% federal premature distribution penalty only on the earnings, however if there were no earnings there would be no tax and no penalty. The only exception to this is if the contributions were from a recent conversion ( within the last 5 years) and then there would be a penalty on both principal and earnings..

See Pub 590 Chapter 2 for information on ROTH IRAs PUB 590 Here

[John G]

OK, I have a very good reply given what you have said.....

Call for an appointment with the senior rep of Raymond James in this office. Go down and have a wonderful chat with him/her. Tell the senior rep that his office is giving very bad advice concerning the transactions with a Roth IRA - to wit, that they incorrectly imply that taxes are owed on contributions.

Since you are bringing this inaccuracy to his attention in a discrete fashion...spring the trap and ask him to waive all the fees for you to close the account. Afterall, you are not charging them for being a "secret shopper" and finding out their training program with regard to Roths is deficient.

If that does not work, you might (again, discretely) ask for directions to the downtown office of the newspaper or perhaps the local TV station. Something about having an appointment with the consumer affairs reporter. (it would help to have the persons name in advance) Then suggest that they have been pestering you about information on a story about how former automotive workers are getting the shaft.

If you don't overplay your theatrical roll, I think you will find that your account closing fee will be graciously waived.

Most business people recognize that a irritated and motivated customer who feels abused has about - 10x the impact of a single pleased customer. A negative experience will be told many times. A good experience is rarely told even once. Like most businesses, RJ has internal data on how much they spend to snare a new customer. Add up the time, postage, printing costs, advertizing, etc. I would not be surprised if they spend $100 to snag a newcustomer. If I were running an RJ office, I would gladly give up your $100 fee to avoid the negative publicity that your could generate by just telling your story. Who wants to open an account at RJ when they don't even know the basic rules of a Roth?

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Now if that doesn't work. Try this. Get three friends from your former auto worker days. Make three hand lettered signs of complaint about excess fees, mis-representation of taxes, bum investing advice. Go down to the main office and slowly walk back and forth in front of the RJ office. Wave to everyone. Don't look angry. If a PR type from the RJ office approaches you, say that you are expecting a TV reporter for a sidewalk interview and ask if he would like to stick around and answer questions.

Now, if you get your account closed, and the $100 fee waived.....you will owed your buddies a lunch.

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From what you have said of your story, you have a great resource right now....TIME. Use it strategically.

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Don't assume that FEES are really fixed. They are not. Folks get fees waived all the time. Sometimes just because they ask. Sometimes because they have significant assets. Often it is simply good business to sweeten the pot by making a big deal of something you give away.

[K2retire]

Within the last year it is highly unlikely that there has been a gain on your original investment. That eliminates the 10% tax penalty.

If there has been a gain during that time period, I would say that your broker has probably earned the $100 due to excellent investment advice.

[Guest retirement planner]

The prime benefit of the Roth IRA plan is the structure of its taxation. You can manage the account in a many ways and yet get various tax benefits and exemptions .

[Guest RaechelParker]

Very nice post with a ton of informative information. I really appreciate the fact that you approach these topics from a stand point of knowledge and information

instead of the typical “I think” mentality that you see so much on the internet these days.