I have a need for about $22,000 urgently.
My Roth IRA has a balance of $126K. Of this, $24K is my original contributions made between 1999 & 2009, the rest is gains. My understanding is that I can withdraw my contributions with no tax consequences which in my case, could is $24K.
Is there anything that I need to watch out for before I make the withdrawal?
Answer :
As you can see, you made your R-IRA contributions on an
after-tax basis. The benefit of a R-IRA, as opposed to a traditional IRA, is
that you do not owe taxes on withdrawals in most instances. In a few cases,
however, you would owe regular taxes on a portion of your withdrawal at a rate
determined by your income bracket and a 10-percent penalty tax. You will never
owe regular federal or state taxes on R-IRA withdrawals of money you have had
in your account for at least five calendar years. Five "calendar
years" means that if you put money in your account at the end of 2007, you
may withdraw it at any time in 2011 since that is the fifth calendar year. At
that point, all withdrawals become "qualified distributions," which
are not taxable. Likewise, any withdrawal you make after turning 59 1/2 is not
subject to taxes. For withdrawals that do not meet either of those two
criteria, a withdrawal is not taxable if you need the money to purchase a first
home, have suffered a disability or have died and bequeathed your Roth IRA to a
beneficiary. Even if your circumstances dictate that your R-IRA withdrawal is
taxable, you can avoid paying tax by limiting the amount of your withdrawal.
You would not owe tax on the amounts you contributed, only on the earnings your
contributions generated, according to the IRS. If you have contributed $24K and
the value of your account has grown to $126K, for example, you can withdraw
$24K at any time and under any circumstances without owing taxes after tax
dollars. However, a portion of the funds you have converted or rolled over from
a 401k or traditional IRA are taxable if the money has not been in your account
for five calendar years. In addition to regular taxes, you should consider…Readmore…
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