IRA Rules

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Question: How long must the money be in an IRA to be used as downpayment?

I just moved my money from my previous employer’s pension plan to an Scottrade IRA account. I want to take out 10K for the down payment of my house. Are there any rules how long the money must have been in the IRA account before it can be taken out?

Thank you!

Answer: For a Roth, it must be in there for 5 years. Beware though that even if you can take out there money, it will not be tax/penality free.

NOYNOY AQUINO – IRA SHARING *CLOSING STATEMENT*

Question: Regarding Roth IRAs. I once owned a home but am now renting. Can I use some of my roth money for money down

The rules say, “for a first home”. I wonder if that mean for the purchase of your first home (as in first home ever) or if that is referring to your first home as in your primary residence (vs putting that money toward a 2nd home/cottage)

Answer: To qualify for “first time home buyer” you can’t have owned a home anytime within the last 2 years. And the rules say that it is the same rules as for a regular IRA, which limits the amount to $10,000 during your lifetime.

Question: Roth IRA Taxation Issue and a case scenario?

I’m having issues understand some of the literature i’m reading on Roth IRAs. I understand that contributions to these plans are post tax dollars. Is it a correct assumption that all and any profits and returns (pending I follow the rules) from all investments will never be taxed?

Secondly, Lets say I make a $5k contribution on Jan 1, 2009. As of December 30th My gross salary for the year will be $50k. On December 31st I am awarded a bonus of $130k. I am now over the income limit for contribution to a Roth (which I’ve already funded)…What happens?

Answer: Jacques is correct about the contributions and earnings not being taxed if you follow the rules.

If you contribute too much to your IRA, you can withdraw the excess before the due date (including extensions) for filing your tax return for the year, and it will be treated as an amount not contributed. This treatment only applies if any earnings on the contributions are also withdrawn. The earnings are considered earned and received in the year the excess contribution was made.

You can find answers to all your IRA questions in IRS Publication 590, which can be found here:

http://www.irs.gov/pub/irs-pdf/p590.pdf

IRA Contribution Limits for 2009, 2010