roth IRA withdrawal

Financial Planning - Financial planning in general. (Moderated) 

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Subject Author Date roth IRA withdrawal Slain 03-31-2007  Re: roth IRA withdrawal joetaxpayer 03-31-2007  Re: roth IRA withdrawal manian.k 04-01-2007  Re: roth IRA withdrawal Rich Carreiro 04-01-2007  Re: roth IRA withdrawal joetaxpayer 04-01-2007  Re: roth IRA withdrawal Elizabeth Richa... 04-01-2007
Posted by Slain on March 31, 2007, 12:20 pm Reading through various posts here, I am a bit confused about the Roth IRA withdrawal process. I thought, once you deposit into Roth IRA, you can withdraw your contributions only after 5 years, while the earnings only after age of 59 1/2. Is this correct? Some posts here seem to suggest that you can withdraw the contribution anytime, without a penalty. Please clarify Posted by joetaxpayer on March 31, 2007, 1:27 pm Slain wrote: > Reading through various posts here, I am a bit confused about the Roth > IRA withdrawal process. > > I thought, once you deposit into Roth IRA, you can withdraw your > contributions only after 5 years, while the earnings only after age of > 59 1/2. Is this correct? > > Some posts here seem to suggest that you can withdraw the contribution > anytime, without a penalty. I'm back to suggesting a glance at http://www.fairmark.com/rothira/distrib.htm because it's better to have a reliable reference. That said, a deposit into a Roth (a deposit being after tax money that came from earnings, not from another account) may be withdrawn, and only its earnings is taxed/penalized 10%. (This lead me to the dual purpose a Roth can serve early on in one's saving/investing career) A conversion a la my anecdotes at http://www.joetaxpayer.com/roth.html need to age the five years to avoid the tax/penalty. (And this is the real-life use of conversions to tax-manage one's accounts. There is no tax tail wagging the investment dog, just some strategic shifting to help minimize annual tax bite.) JOE Posted by on April 1, 2007, 7:33 am > Slain wrote: > > Reading through various posts here, I am a bit confused about the Roth > > IRA withdrawal process. > > > I thought, once you deposit into Roth IRA, you can withdraw your > > contributions only after 5 years, while the earnings only after age of > > 59 1/2. Is this correct? > > > Some posts here seem to suggest that you can withdraw the contribution > > anytime, without a penalty. > > I'm back to suggesting a glance at > > http://www.fairmark.com/rothira/distrib.htm > > because it's better to have a reliable reference. > > That said, a deposit into a Roth (a deposit being after tax money that > came from earnings, not from another account) may be withdrawn, and only > its earnings is taxed/penalized 10%. > (This lead me to the dual purpose a Roth can serve early on in one's > saving/investing career) > > A conversion a la my anecdotes athttp://www.joetaxpayer.com/roth.html > need to age the five years to avoid the tax/penalty. > (And this is the real-life use of conversions to tax-manage one's > accounts. There is no tax tail wagging the investment dog, just some > strategic shifting to help minimize annual tax bite.) > > JOE This might sound dumb, but what exactly is a conversion? ======================================= MODERATOR'S COMMENT: Please trim the post to which you are responding. "Trim" means that except for a FEW lines to add context, the previous post is deleted. Posted by Rich Carreiro on April 1, 2007, 8:41 am manian.k@gmail.com writes: > This might sound dumb, but what exactly is a conversion? A Roth conversion is when you convert a traditional IRA to a Roth IRA. -- Rich Carreiro rlcarr@animato.arlington.ma.us Posted by joetaxpayer on April 1, 2007, 9:20 am manian.k@gmail.com wrote: >>A conversion a la my anecdotes at http://www.joetaxpayer.com/roth.html >>need to age the five years to avoid the tax/penalty. >>(And this is the real-life use of conversions to tax-manage one's >>accounts. There is no tax tail wagging the investment dog, just some >>strategic shifting to help minimize annual tax bite.) >> >>JOE > > > This might sound dumb, but what exactly is a conversion? One is permitted (subject to income restrictions) to take a regular IRA, or a portion of it, and convert it to a Roth IRA. They would have to pay tax on the portion that's pre tax, declaring it as income for the year it's converted over. I give detailed examples at my site explaining how this can be a useful strategy to manage one's tax bracket year to year. I recently interviewed a well paid person (33% bracket) who told me he was going to take the rest of the year off and begin a new job in 08. This is his opportunity to roll over his 401(k) to an IRA and convert a chunk of it to a Roth, just to where he's paying 25% (married up to $128K). For others, this strategy can be used during periods of unemployment, or when one spouse takes unpaid time off to have a child. At retirement, it's a way to manage one's required distributions and their effect on social security. JOE Similar Threads Posted withdrawal process from Roth IRA March 26, 2007, 11:03 am NQ annuity withdrawal February 19, 2008, 5:07 pm 401 (k) early withdrawal penalty calculation November 8, 2006, 12:43 pm Effect of Buffer on Withdrawal Rates December 4, 2006, 10:34 am Optimizing Social Security Benefit withdrawal February 9, 2007, 12:34 pm Annuity with lifetime withdrawal and Guaranteed Benefit? November 20, 2007, 5:07 am Fidelity study on retirement income and withdrawal rates April 8, 2007, 3:15 pm old retirement acct: total withdrawal vs higher annuity? November 14, 2008, 12:52 pm roth ira April 30, 2008, 5:06 am roth ira November 20, 2008, 3:31 pm