tax on Roth IRA Distributions
I am under age 59 and have held a Roth IRA for more than 5 years. My balance has the original contribution with earnings. If I decide to take out my original contribution, can I distribute this tax free?
I am under age 59 and have held a Roth IRA for more than 5 years. My balance has the original contribution with earnings. If I decide to take out my original contribution, can I distribute this tax free?
Permalink Submitted by Alan Spross on Tue, 2010-04-20 00:11
Yes, you can take out your balance of regular contributions tax and penalty free at any time. However, you still must report the distribution on Form 8606.
Permalink Submitted by Kevin Zoltek on Tue, 2010-04-20 01:44
OK, I understand the tax free issue. But, if I am under age 59 1/2(assuming I have satisfied the 5 year hold period), how am I able to avoid the penalty free rule. I know there are qualified distributions to avoid the penalty, but are you telling me that I can just take out my original contributions at anytime without penalty?
Permalink Submitted by Alan Spross on Tue, 2010-04-20 01:59
Yes, you can take out your REGULAR contributions any time without tax or penalty.
But conversions must be held 5 years before you can withdraw them without incurring the 10% penalty. This period also ends at 59.5. Make sure that you are not withdrawing a conversion done after 2005, or you incur the penalty. Conversions only come out AFTER all your regular contributions have been distributed.