ROTH as an emergency fund - revisited

#6 01-04-2004, 06:46 PM

"Mark0Young" <mark0young[at]aol.com> wrote in message
news:20040103121736.07346.00002361[at]mb-m26.aol.com...
- quote -

> Not according to the IRS! There is NO 5-year period for removing
 regular
> contributions from a Roth IRA.
> You can remove the regular contributions from a Roth IRA at any
time,
> for any purpose, no tax, no penalty. (The actual investments may impose
> contingent deferred sales charges or surrender charges or the like, but
those
> are imposed by those specific investments, not by the tax laws.)
> Now when it comes to earnings or conversions , there are
5-year
> periods involved and the rules are more complicated (e.g., for tax-free,
> penalty-free withdrawal of earnings, one way would be to have a Roth IRA
for at
> least 5 years and be at least 59.5 years old).
> See IRS Publication 590 for more information.

Good job, Mark. Back when the Roth was first introduced, there was a LOT of
misinformation about pre-59.5 withdrawals, and the Service wasn't exactly
forthcoming with clarifications for quite a while. I can remember some
investment and insurance companies waiting six months or more, before
finally allowing accounts to be opened, because of the confusion on
pre-retirement taxation, and/or penalites, if any.

Brent D. Gardner, ChFC
Chartered Financial Consultant
http://members.cox.net/brentdgardner1378/

"Be ever questioning. Ignorance is not bliss. It is oblivion. You don't go
to heaven if you die dumb. Become better informed. Learn from other's
mistakes. You could not live long enough to make them all yourself." - Hyman
George Rickover (1900-86), Admiral, US Navy, advocated development of
nuclear subs & ships

The Chartered Life Underwriter (CLU) and Chartered Financial Consultant
(ChFC), designations owned and exclusively offered by The American College,
signify the highest standards of academic study and professional excellence
in the financial services industry.

#5 01-04-2004, 01:18 AM

Mark0Young wrote:
- quote -

> In article <gH%Ib.188118$8y1.599500[at]attbi_s52> , "cal-lester"
> <cal-lester[at]comcast.net> writes:
> > NONE, provided that the funds have been in the ROTH for a minimum of
> > FIVE years.
> > Since the contribution to the ROTH was NOT Income Tax Deductible,
> > then any funds (up to your basis) that you remove from the ROTH are
> > NON Income taxable.
> Not according to the IRS! There is NO 5-year period for removing
> regular contributions from a Roth IRA.

I stand corrected. My fat fingers wrote the answer
before my brain was fully booted-up.
Cal

- quote -

> You can remove the regular contributions from a Roth IRA at
> any time, for any purpose, no tax, no penalty. (The actual
> investments may impose contingent deferred sales charges or surrender
> charges or the like, but those are imposed by those specific
> investments, not by the tax laws.)
> Now when it comes to earnings or conversions , there are
> 5-year periods involved and the rules are more complicated (e.g., for
> tax-free, penalty-free withdrawal of earnings, one way would be to
> have a Roth IRA for at least 5 years and be at least 59.5 years old).
> See IRS Publication 590 for more information.
> Mark A. Young

#4 01-03-2004, 04:18 PM

In article <gH%Ib.188118$8y1.599500[at]attbi_s52> , "cal-lester"
<cal-lester[at]comcast.net> writes:

- quote -

> NONE, provided that the funds have been in the ROTH for a minimum of FIVE
> years.
> Since the contribution to the ROTH was NOT Income Tax Deductible, then any
> funds (up to your basis) that you remove from the ROTH are NON Income
> taxable.

Not according to the IRS! There is NO 5-year period for removing regular
contributions from a Roth IRA.

You can remove the regular contributions from a Roth IRA at any time,
for any purpose, no tax, no penalty. (The actual investments may impose
contingent deferred sales charges or surrender charges or the like, but those
are imposed by those specific investments, not by the tax laws.)

Now when it comes to earnings or conversions , there are 5-year
periods involved and the rules are more complicated (e.g., for tax-free,
penalty-free withdrawal of earnings, one way would be to have a Roth IRA for at
least 5 years and be at least 59.5 years old).

See IRS Publication 590 for more information.

Mark A. Young

#3 01-02-2004, 12:28 AM

Excellent. Thanks so much for your help. Will take your advice and google!

"Caroline" <caroline10027remove[at]earthlink.net> wrote in message
news:7h2Jb.29844$Pg1.14998[at]newsread1.news.pas.earthlink.net...
- quote -

> Not so fast.
> In general, one can take out the *principal* any time as far as the law on
Roth
> IRAs is concerned.
> It's the earnings for which there are age and time limitations.
> Furthermore, one may return any principal previously withdrawn from the
Roth IRA
> within 60 days of the withdrawal and so allow earnings on it to resume
growing
> tax-free. Thus the principal of a Roth IRA may serve as a short-term
bridge
> loan.
> The law permits taking such a loan once a year.
> If you're talking about principal that is the result of a conversion from
a
> traditional IRA, then this becomes a little more complicated.
> The answer to your question is well-documented on the Internet. Google for
"Roth
> IRA" and "withdrawals".
> "T P" <tpick39[at]earthlink.net> wrote
> > OK, thanks...that makes sense. What if the funds have only been in for 3
> > years...is it the standard 10% penalty?
> > > > > "cal-lester" <cal-lester[at]comcast.net> wrote
> > > T P wrote:
> > > > Need some clarification...if you're under 59 1/2 and would like to
> > > > take out principal in the case of an emergency...exactly what
> > > > penalties and taxes are you hit with?
> > > > Thanks in advance.
> > > > > > > NONE, provided that the funds have been in the ROTH for a minimum of
FIVE
> > years.
> > > Since the contribution to the ROTH was NOT Income Tax Deductible, then
any
> > funds (up to your basis) that you remove from the ROTH are NON Income
> > taxable.

#2 01-01-2004, 10:44 PM

Not so fast.

In general, one can take out the *principal* any time as far as the law on Roth
IRAs is concerned.

It's the earnings for which there are age and time limitations.

Furthermore, one may return any principal previously withdrawn from the Roth IRA
within 60 days of the withdrawal and so allow earnings on it to resume growing
tax-free. Thus the principal of a Roth IRA may serve as a short-term bridge
loan.

The law permits taking such a loan once a year.

If you're talking about principal that is the result of a conversion from a
traditional IRA, then this becomes a little more complicated.

The answer to your question is well-documented on the Internet. Google for "Roth
IRA" and "withdrawals".

"T P" <tpick39[at]earthlink.net> wrote
- quote -

> OK, thanks...that makes sense. What if the funds have only been in for 3
> years...is it the standard 10% penalty?
> "cal-lester" <cal-lester[at]comcast.net> wrote

> > T P wrote:
> > > Need some clarification...if you're under 59 1/2 and would like to
> > > take out principal in the case of an emergency...exactly what
> > > penalties and taxes are you hit with?
> > > Thanks in advance.
> > > > NONE, provided that the funds have been in the ROTH for a minimum of FIVE
> years.
> > Since the contribution to the ROTH was NOT Income Tax Deductible, then any
> funds (up to your basis) that you remove from the ROTH are NON Income
> taxable.

#1 01-01-2004, 09:46 PM

OK, thanks...that makes sense. What if the funds have only been in for 3
years...is it the standard 10% penalty?

"cal-lester" <cal-lester[at]comcast.net> wrote in message
news:gH%Ib.188118$8y1.599500[at]attbi_s52...
- quote -

> T P wrote:
> > Need some clarification...if you're under 59 1/2 and would like to
> > take out principal in the case of an emergency...exactly what
> > penalties and taxes are you hit with?
> > Thanks in advance.
> NONE, provided that the funds have been in the ROTH for a minimum of FIVE
years.
> Since the contribution to the ROTH was NOT Income Tax Deductible, then any
funds (up to your basis) that you remove from the ROTH are NON Income

taxable.
- quote -

> Cal

01-01-2004, 08:42 PM

T P wrote:
- quote -

> Need some clarification...if you're under 59 1/2 and would like to
> take out principal in the case of an emergency...exactly what
> penalties and taxes are you hit with?
> Thanks in advance.

NONE, provided that the funds have been in the ROTH for a minimum of FIVE years.
Since the contribution to the ROTH was NOT Income Tax Deductible, then any funds (up to your basis) that you remove from the ROTH are NON Income taxable.
Cal

#-1 01-01-2004, 06:57 PM

Need some clarification...if you're under 59 1/2 and would like to take out
principal in the case of an emergency...exactly what penalties and taxes are
you hit with?
Thanks in advance.

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