Roth IRA Distribution
Good Morning
I have a question regarding Roth IRA distribution rules
Roth IRA contributions follow basis first withdrawal rules.
It’s my understanding that an individual <59.5 can contribute "X" dollars to a Roth IRA and subjequently withdraw "X" at anytime (even prior to 5 year hold period) without being subject to taxes and or 10% early withdrawal penaltiy (as long as they withdraw basis only).
Others have said the 5 year period must be satisified (avoiding penalities and/or taxes) prior to withdrawing basis only.
Any help is greatly appreciated.
Thank you.
Permalink Submitted by mk foss on Fri, 2013-02-15 19:11
Since you do not deduct the Roth contribution, removing it from the account is tax free. It is only the growth on the account that could be taxed if withdrawn before 5 years have elapsed. There is also no penalty if you take your own money back. If the Roth is created by converting an IRA to a Roth IRA – there is a possibility of penalties for 5 years though.
Permalink Submitted by Alan - IRA critic on Fri, 2013-02-15 19:11
Withdrawing Roth regular contributions tax and penalty free does not have any holding period, you can do it the next day if you wish. For a CONVERSION contribution however, the conversion must be held 5 years or there is a 10% penalty under 59.5 for withdrawing the conversion. Regular contributions come out prior to conversion contributions and conversions come out in order of the oldest first.