roth ira quest
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Senior User
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From: Bryan Texas
roth ira quest
All you tax people and such I neded a quick question help to settle a bet with a friend over a roth ira. I think i could be wrong as a general rule of thumb you can pull your funds from the account early with a 10% peneality , He says that you lose everything but your principle?
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Out of my Texas Life & Health Insurance book:
"Distributions from a Roth IRA are not included in taxable income; however, qualified distributions cannot be made prior to the fifth year of the accounts existence. With qualified distributions, there is no 10% penalty for early withdraw. Qualified distributions include those made after 59 1/2, those made to the estate or beneficiary at the owners death, those made to a disabled owner, those made to a first time homebuyer, or if paying qualified higher education expenses for the owner, owners spouse, children or grandchildren. Non-qualified distibutions are subject to the same tax consequences as traditional IRA's."
Hope that helps.
"Distributions from a Roth IRA are not included in taxable income; however, qualified distributions cannot be made prior to the fifth year of the accounts existence. With qualified distributions, there is no 10% penalty for early withdraw. Qualified distributions include those made after 59 1/2, those made to the estate or beneficiary at the owners death, those made to a disabled owner, those made to a first time homebuyer, or if paying qualified higher education expenses for the owner, owners spouse, children or grandchildren. Non-qualified distibutions are subject to the same tax consequences as traditional IRA's."
Hope that helps.
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Bottom line if don't meet the qualifications as listed in the above post you will pay 10% penalty plus the withdrawal is also taxed as income at your income tax rate.
So withdrawing the money could cost you up to 40%. 10% penalty plus income tax rate of 15% - 30% based upon your income level.
So withdrawing the money could cost you up to 40%. 10% penalty plus income tax rate of 15% - 30% based upon your income level.
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With a Roth you can withdraw the principal without penalty or taxes because you already paid taxes on it. It is the earnings that must be qualified or you get the 10% penalty.
With a traditional IRA you pay the 10% penalty on anything you take out that is not qualified, in addition to taxes if they haven't been paid on it (for rollover or deductable IRAs).
With a traditional IRA you pay the 10% penalty on anything you take out that is not qualified, in addition to taxes if they haven't been paid on it (for rollover or deductable IRAs).
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Senior User
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From: Bryan Texas
ok that makes since, see my friend has had a roth for like 2 years and put like maybe a grand in principle , well he needs funds ( baby on way ) and would be happ y to get just his principal back
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