Java Joe wrote:

- quote -

Are you still working for the company that sponsors your
401K plan? If so, the only withdrawals you are allowed are
for "hardship" purposes, and these funds CANNOT be rolled
into your traditional IRA.

- quote -

Money that has been contributed to your Roth IRA can be
withdrawn AT ANY TIME, for any purpose, without tax or early
withdrawal penalty.

- quote -

Correct.

- quote -

No, that won't work. If you CONVERT money from a traditional
IRA to a Roth IRA, you are restricted on withdrawal of this
money for 5 tax years. Withdrawals are subject to a 10%
early withdrawal penalty, unless you qualify for an
exception. "First time homebuyer" (no ownership interest for
the past two years) is such an exception, but applies only
to the first $10,000 withdrawn (lifetime limit).

- quote -

Not exactly. Roth IRA accounts, for withdrawal purposes, are
grouped in three ways - annual contributions, conversion
contributions, and earnings.

- quote -

What's the big deal about selling a few stocks? At least
that money can be withdrawn penalty-free (as opposed to your
alternate plan).

- quote -

False conclusion, see earlier analysis of the tax
consequences.

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"Java Joe" <cop3252[at]yahoo.com> wrote:

- quote -

Not quite. The penalty exception applies if you haven't
OWNED a home in the 2 previous years. Also, the $10,000 is
a lifetime limit. See IRS Publication 590.

- quote -

Correct. You could withdraw $21,000 (the total amount of
your contributions) from the Roth with no tax or penalty
due. You wouldn't apply the $10,000 home purchase exclusion
to this withdrawal.

- quote -

It should work if you meet the first-time homebuyer
exception. You don't need to convert all of your
traditional IRA to Roth, just the $21,000 you want to remove
from the Roth. You could then take the $10,000 from the
traditional. Or you could convert $31,000. Base this
decision on the fees that you'll be paying. In either case
you'll save current tax due if you leave the rest of your
traditional IRA alone.

--
Phil Marti
Clarksburg, MD

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I need money for a mortgage down payment.

I have all the money I need in a 401K, but CAN NOT take a
loan out of my 401K. I will roll the money into a
traditional IRA. This is not my first home but my second.

I have a Roth IRA account that I have been putting maximum
amount into each year since 1998 (total put in was $21K).
If I am correct I am allowed to withdraw $10K from IRA for a
home purchase (if no home previously purchased in last 2
years). Can I withdraw this $10K from my Roth IRA and not
pay taxes on it nor pay early withdraw penalty?

If I am correct I may withdrawl all the money put into a
Roth IRA (tax free and no early withdraw penalty).

Can I roll the traditional IRA I created above into a new
Roth IRA and pull out $21K (amount put into other Roth IRA
account) + $10K (for home buyer) without early withdraw
penalty (=$31K).

The IRA considers all Roth accounts to be as one. It would
be stupid to sell the stocks I have in my old Roth account
to gather the $21K that I put into ther account, so I would
like to use the cash in my new Roth IRA account.

Yes, I will pay taxes when I roll the traditional IRA into a
new Roth IRA but I should then be able to pull $31K ($10K +
$21K) out with no early withdraw penalty, and not have to
disturb my old Roth IRA account.

Joe

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