Withdrawal of contributions to Roth IRA’s

I have a young client who needed to withdraw $1K from her Roth IRA for an emergency. Since this is less than the total she’s contributed to the IRA, I know that she can take this portion out without paying taxes (when she starts taking out the gains, it’s another story), but the fund company tried to tell me that she WOULD be responsible for the 10% premature withdrawal penalty, which conflicts with everything I’d learned along the way. So I figured I’d turn to the experts. Is she responsible for the 10% penalty for taking out her own contributions?



The first amounts to come out of the Roth are the contributions and there is no tax or penalty on those withdrawals. If no contributions had been made and she was withdrawing amounts that had been converted from a traditional IRA, she would owe no tax but the 10% penalty would apply.

The fund company person must have looked at the wrong line on her chart.



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