Comments on: Withdrawing Your Roth IRA Contributions

By: mary

mary — Tue, 15 Sep 2009 16:04:12 +0000

i am a little confused on the 5 year withdrawal without penalty rule. eg If I contributed 4,ooo each year for the last 5 years, am i able to take out all 20,000 now if needed or does each years contributions have to be in there for 5 years… In other words would I only be able to take out the first $4,ooo now because that is the only contributions that has been in there for five years?

By: Nick W

Nick W — Tue, 30 Jun 2009 16:29:22 +0000

It is a terrible idea to withdraw contributions from your Roth IRA. Unless you are in dire need, you are hurting yourself in the long run because that money won’t continue to grow for your retirement.

By: Ell

Ell — Mon, 15 Jun 2009 00:21:08 +0000

The IRS answered these questions and others about Roth IRAs in Regulation 1.408(A)-6, which you can read free of charge on the web site of the US Gov’t Printing Office:
http://edocket.access.gpo.gov/.....408A-6.htm

IRS Regs are authoritative guidance.

By: DC

DC — Fri, 05 Jun 2009 05:40:46 +0000

I understand that withdrawing the contributory asset from the Roth IRA is tax and penalty free after 5 years. My only question is HOW do I withdraw it. Do I need to fill in any IRS form? Thanks.

By: Jack

Jack — Sat, 04 Apr 2009 20:30:22 +0000

It may be a personal failing on my part, but I’m having trouble sorting out why the differences of treatment (if any) relative to withdrawals of regular yearly contributions vs withdrawals of contributions as the result of a roll-over.

If funds injected into a Roth from a rollover of a Traditional IRA are fully tax paid, why a five year wait to access the funds without penalty??

Is there a justification? Thanks, Jack

By: Chad

Chad — Thu, 14 Aug 2008 18:09:03 +0000

Carol – you can take out any amount of your contributions tax-free at any time. I also found out that you can put your contribution (only for the current year) back in within 60 days.

By: Carol

Carol — Thu, 14 Aug 2008 16:31:03 +0000

Looking for clarification: converted IRA to Roth IRA over 5 years ago (paid appropriate taxes at the time);
I am under age 59 – can I make a withdrawal of ‘contributions’ [not earnings] both tax and penalty free?? is there a minimum or maximum withdrawal??

thank you.

By: Chad

Chad — Tue, 12 Aug 2008 23:08:15 +0000

I’m interested in the rules regarding withdrawing your contributions and putting them back in. Does anyone know the rules on that?

By: Jimmy

Jimmy — Sat, 05 Apr 2008 01:41:46 +0000

I thought you could pull out your contributions and the IRS gave you 60 days to put them back in. Is this true?

By: J

Sat, 04 Nov 2006 04:04:56 +0000

What if you contribute at the beginning of 2007, but then you get a big bonus, big raise which puts you over the contribution limit? You have to take it out right? But what about the increase in value of the $4k?

By: nickel

nickel — Fri, 03 Nov 2006 14:10:18 +0000

Norm, thanks for your comments… They keep me honest!

By: Norm

Norm — Fri, 03 Nov 2006 13:48:06 +0000

Was just going back through some old posts and, seeing as I was the ” recent commenter, however, challenged the veracity of this claim, ” referred to above, I must say it makes me feel a little better to realize that there are plenty of other people somewhat confused about this topic. It was a great post nickel…thanks!

By: jeff

jeff — Wed, 24 May 2006 15:00:54 +0000

I don’t think it is that clear. I’ve been reading through IRS p590 and it says you can pull out contributions by due date of the tax return for the year the contribution was made. Then it says you must include the earnings as income for the year of the contribution. Previous years contributions aren’t considered qualified and are subject to the additional (10%) tax on early distributions. I think ‘regular contribution’ only refers to that tax years contribution and must be pulled out before the tax return due date to avoid the penalty.

By: Wes

Wes — Wed, 24 May 2006 00:19:54 +0000

Withdrawing from your IRA (or the ability to) provides much needed flexability but should still be one of the last resorts since you are truly defeating the tax purposes and taking a hit to your retirement.

By: 2 million

2 million — Thu, 11 May 2006 18:35:10 +0000

Awesome thanks! This was my understanding, but I hadn’t really found an authoritative document that explicitly said it.

By: LSD

LSD — Mon, 08 May 2006 19:15:11 +0000

Great job nickel, very informative post.

By: Steve Mertz

Steve Mertz — Thu, 04 May 2006 22:11:53 +0000

Good Job Nickel-That doubting Thomas would really fret when you tell em that some people even put real estate in their Roth’s! Pretty sweet for folks who have the cash in the Roth’s and don’t want to worry about tax gains when flipping properties!

By: Apex

Apex — Wed, 03 May 2006 20:51:43 +0000

Ok last post, promise.

Is anyone concerned that the government will one day change the rules on Roth’s especially with the impending social programs financial problems? Thats the other reason I wanted to rebuild my paper trail. If they did change the rules I don’t know in what manner they would do it but if they did it would make the Roth a far inferior vehicle to anything tax deductible.

Anyone concerned about this? I have heard some financial advisors comment on its possibility. If it happens I would hope they would just halt future contributions and not tax anything currently in Roth accounts. However my fear is that the desire to do it would stem from the need for more tax revenues. The large untaxed stream of dollars sitting in Roth’s could be pretty tempting to some who think that certain people are not paying their fair share by having this money on which they will never owe any tax. It wouldn’t be too hard for people to start a fairness argument about it and get some serious headway.

By: Apex

Apex — Wed, 03 May 2006 20:44:09 +0000

ok, I followed the Investopedia link above and found this. Assets are taken out in the following order:

1. regular Roth IRA participant contributions.
2. taxable Traditional IRA conversions.
3. nontaxable Traditional IRA conversions.
4. earnings on all Roth IRA assets.

#2 is the one I was talking about.

only 1 and 3 are fully tax and penalty free. 2 is tax free since taxes are paid at conversion but will have a 10% penalty if it has been less than 5 years since the conversion. If its been more than 5 years then it is also tax and penalty free. I think I recall reading something like that now that I see it again.

It doesn’t seem to make much sense to me that 2 comes out before 3 but I guess its amazing it makes as much sense as it does.

So in case anyone was wondering, I answered my own question for you.

I try to keep pretty good records of my conversions and contributions but my Roth has been moved around a little bit and I lost a little paperwork. I had recently worked to rebuild my paper trail by contacting the plan administrators and asking for back paper work and I think I have the trail fully rebuilt. I don’t plan to tap it, but I just wanted to know if I did that I could prove my contributions and conversions.

By: Apex

Apex — Wed, 03 May 2006 20:32:29 +0000

I can’t seem to find a clear and explicit explanation of how this affects conversions from a non-taxable traditional IRA that was put into a Roth IRA. That being money that was put into a traditional IRA that was put in on a pre-tax basis and then converted to a Roth IRA and then the full taxes paid on the entire conversion amount at the time of conversion. This money is taxed in the same way as a normal contribution is but it allows one to pile a lot more money into the Roth if you have money in a traditional (especially if rolled from a former 401-k) and meet the income limits to qualify for the conversion.

There is one quote above that mentions “and from nontaxable conversions of Traditional IRA” but I am not sure exactly what that means. What exactly is a nontaxable conversion? My conversions were from non taxable IRAs but the conversion itself was most definatley a taxable event. I would think I could withdraw that entire sum in addition to contributions since I have already paid the full tax on it but perhaps that is not the case.

Is it clear what I am talking about? Can you shed any light on that nickel?

By: PrimeRate

PrimeRate — Tue, 02 May 2006 17:58:23 +0000

Is the contribution limit to a Roth IRA net? For example, if I contributed 4000 in the beginning in the tax year, but a few months later withdrew 2000. Would I still be able to recontribute 2000 before the end of the tax year? Is this viewed as a 6000 dollar contribution for the year or a net 4000 contribution?

By: nickel

nickel — Tue, 02 May 2006 16:38:17 +0000

Jerry: I agree completely. I’m only recommending this as a safety net for those that otherwise wouldn’t be contributing to their Roth out of fear of a cash flow crunch. In this case, those individuals would be best served by stuffing their Roth and then hoping for the best. If they can stave off the cash flow crunch, then they’ll come out ahead. If not, they can always get the money back out.

By: Jerry Kindall

Jerry Kindall — Tue, 02 May 2006 15:48:09 +0000

One of the major drawbacks of taking a Roth withdrawal is that you can’t really put the money back in. If you put in $4000 one year and take out $2000, then you’re going to be $2000 behind forever, assuming you’re maxing out your contributions each year. So it’s kind of a last resort.

By: MyFinancialJourney

MyFinancialJourney — Tue, 02 May 2006 15:41:37 +0000

Excellent post, I’ve been looking for something black and white like this….great job!