IRA Rules

Posts Tagged ‘rules for withdrawing ira funds’

Question: What are the rules for withdrawing contributions from a Roth IRA?

Is the only restriction that you can only withdraw contributions after the roth account has been open five years, or are there additional restrictions? For example, if my account has been open 10 years, can I withdraw contributions made 2 years ago?

Answer: It looks like you can withdraw contributions from RothIRA penalty and tax free any time, without waiting for 5 years. The IRS article about RothIRA doesn’t mention much about penalties, and both Fidelity and Vanguard state that “Roth IRA contributions can always be withdrawn at any time without penalty” (from the Fidelity site). The penalty and the 5-year rule only apply to withdrawing earnings. And by the way wherever the 5-year period is mentioned, it’s clear it’s referring to the age of the account, not of the money being withdrawn.

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Question: Question about old IRA accounts and taxes?

I have an IRA that I started in 1978, under old rules. I did not have any other retirement account at that time. I have never added more money to the IRA since opening the initial account, although I have rolled it over several times, most recently (maybe 15 years ago) into a self-directed brokerage account (still an IRA). I simply don’t remember – given that I set this up in 1978, would this have been after- or before-tax dollars? Will I owe tax when I withdraw the funds? Thanks for your advice!

Answer: IF you don’t know, it’s pretax. You will owe when the money is distributed.

Only a few people did after-tax contributions and it was paramount that they save the records showing the non-deductible contributions. (tax return and form 8606.)

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