IRA Rules

Archive for February, 2007

Question: Early Withdrawal From Roth IRA Question?

The value of my Roth IRA currently is less than what it was when I first opened the account. If I withdraw the money today, will I still be charged an early withdrawal penalty?

Answer: no. you’ve already paid taxes on your contributions. you can actually take your contributions out at any time for any reason completely tax free in a Roth. you only ever have to pay the penalty on earnings, which in your case doesn’t even apply.

but i would suggest that you use this as a last resort. this is a retirement account. you can’t just put all the money back into it if you change your mind.

there won’t be any tax penalties, but the opportunity cost will be huge.

Finance & Investment Tips : Early Withdrawal Penalty on a CD Held in an IRA

Question: Is there a penalty for withdrawal on profit sharing if it is for first time purchase of a home?

Suze Orman said there isn’t a penalty if you use your IRA for a first time home purchase. I have a profit sharing account & want to know if this same rule applies?

Answer: Normally you cannot withdraw anything from an employee retirement plan if it is at a current employer. IRS Publication 575 covers distributions from pensions and annuities including 401k, 403b, etc. And it does not mention any penalty exception for buying a home.

Note that if it was from a former employer and able to be transferred to an IRA, up to $10,000 could be withdrawn without penalty towards first home (see IRS Publication 590 for details). However, it does not say there would be no tax. It would be taxed as though the withdrawal was added to your income.

Retirement Savings – IRA Withdrawals, Rules and Penalties

401k Distributions