Looking to rollover and need information

[Guest stioffan]

I am a newbie with this and need an answer to the following question:

Scenario 1

If I open a Roth IRA and decide to put $5000 into a mutual fund inside the Roth. A month goes by and something happens where I need to withdraw my money. It is my understanding that I can withdraw the original $5000 tax and penalty free. What has to stay is the earnings made off the $5000 (which should be minimal considering I didn’t have it in that long). The bank may charge me some cancellation fee of some kind But as far as the IRS is concerned, I am in the clear.

Scenario 2

I rollover $5000 from an employers Simple IRA into a Roth IRA. As before, one month later I need the money. Can I withdraw it without a penalty? How about a year later? Five years?

The way I understand Roth is that the contributions are after tax. When I perform the rollover, those taxes will not come out until the next tax year. So after I am taxed, would the rollover contribution be considered just like a regular cash contribution?

[Guest Rajeev]

For Scenario 1: See http://www.irs.gov/publications/p590/ch02....blink1000231057

For Scenario 2: Rollovers are not the same as Cash Contributions, and hence do not follow the Cash Contribution limits... In the SIMPLE to ROTH conversion, the individual would have to pay taxes on the SIMPLE value which would be added to the income for the individual.

[Guest stioffan]

Thank You Rajeev