Trading in my Roth IRA that I started in 2020. Withdrawal time frame w/o penalties?
I am 71 years old and still work full time. I continue to contribute the maximum amount allowed by law into the company sponsored 401K plan. In 2020 I opened a Roth IRA account in a brokerage account for 2019, have added funds for 2020, and added more funds this year for 2021. I am using the funds in this account to buy and sell stocks. Will I have to pay taxes on the original funds I put into this account if I decide to withdraw some or all in less than five years from date of opening the account, and will I have to pay taxes on the money I am making trading stocks successfully? Thank you very much.
Permalink Submitted by Alan - IRA critic on Wed, 2021-02-17 05:35
Taxes are not due on any trading profits until you take a distribution from the Roth that includes your gains, and your gains come out last. A withdrawal of the amounts you contributed are tax and penalty free, so you must keep track of the amount of your contributions. You get a Form 5498 from the custodian each year showing the amount of your contributions. Once 2025 arrives, your Roth IRA will be qualified and the entire balance would be tax free if you distributed it.
Permalink Submitted by David Mertz on Wed, 2021-02-17 13:15
Since the first Roth IRA contribution was made for 2019, your Roth IRA(s) will be qualified on January 1, 2024 rather than having to wait until 2025.