- quote -

I understand the first part about "qualified distributions".
But the phrase "distributions that are a return of your
regular contributions from your Roth IRA(s)" doesn't exactly
scream out at me "withdrawals of your regular contributions
will not be taxed" To me, this wording -- "a return of your
regular contribution" -- sounds like it's talking about the
growth or appreciation on the original contribution, but
makes no reference to the contribution itself.

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bsllas[at]yahoo.com (Lori) wrote:

- quote -

How much clearer can the following statement (from page 59
of Pub 590) explain the nontaxability of withdrawing your
contributions?

"ARE DISTRIBUTIONS TAXABLE?

You do not include in your gross income *qualified
distributions* or distributions that are a return of your
regular contributions from your Roth IRA(s)."

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Thanks for all the replies. I should have been more clear in
my original post -- I do realize that my husband and I will
each have separate Roth IRA accounts, each account subject
to the maximum of $3000. So combined, we will be able to
contribute $6000 for 2004. So if we each contribute the max
this year (and assuming our investment choices increase in
value), then next year we get hit with some large emergency
expense that we can't cover in regular savings, we would be
able to withdraw the $6000 irs-penalty free (not counting
possible penalties such as early redemption, etc.)

I'll admit I was looking for some clear, direct language in
an IRS doc stating this, and doc 590 doesn't state it as
clearly as I was hoping. The reader basically draws the
conclusion by stepping through the worksheet they provide.
But, at least it's something.

Thanks again for the info.

Lori

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Lori wrote:

- quote -

Negative. You may NOT contribute 6000$ per year, but 3000$;
your spouse if also qualified, may contribute up to 3000
also. Remember, there are no joint Roth accounts.

(rest snipped)

Cheer$,
Harlan Lunsford, EA n LA

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bsllas[at]yahoo.com (Lori) wrote:

- quote -

That is correct, as you make the contribution with after-tax
funds. Just like contributions to a savings account.

- quote -

The MAXIMUM you can contribute to your account is $3,000 per
year (at present). The other $3,000 goes into an account for
your spouse, and is under THEIR control.

- quote -

I hope you also realize that you are talking about two Roth
IRA accounts, one for you and one for your spouse. Their
choice of investments in the account might not agree with
yours.

- quote -

Basically, you are correct, although the only tax advantages
over a brokerage account is the deferred taxation on the
earnings. If you hold the account long enough (5 years and
age 59-1/2) the earnings are tax-free.

- quote -

It's clearly stated in IRS Pub 590.

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bsllas[at]yahoo.com (Lori) writes:

- quote -

The custodian would probably charge you a premature
distribution fee, probably between $25 and $50.

- quote -

Yes, it would.

- quote -

Publication 590 should meet your needs. It's supposed to be
written to the 9th grade level, and it seems clear to me.

Phil Marti
Topeka, KS

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I've read in several sources that *contributions* to a Roth
IRA can be withdrawn tax free at any time, and this type of
withdrawal is not subject to the 5 year minimum holding
period. I am thinking about opening a Roth IRA and funding
the maximum amount every year, rather than continuing to put
all my long-term-non-retirement money into a taxable
brokerage account. So, if I contribute $6000 per year (me +
spouse), that means I'd be able to withdraw $6000 after year
1, $12000 after year 2, etc., should an emergency ever arise
where I needed to do so.

I realize that if I were to use my Roth IRA to buy into a
fund that has a minimum holding period, I would be subject
to any early redemption fees for that fund, but that would
be the only possible fee I might incur (as long as my
withdrawal does not exceed what I've contributed).

I wanted to find out if I'm interpreting what I've read
correctly. I'm looking for a place to save and invest that
will provide some tax benefit over a regular brokerage, yet
provide me with ability to withdraw in an emergency. This
sounds like it would work.

Also, if anyone knows of a specific IRS document which
states this, I'd appreciate a reference (so far the IRS docs
I've come across don't come right out and say this, it's
more or less implied by wording).

Feel free to email me directly.

Thank you,
Lori

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