Withdrawing from Roth's

[RetireEarly50s]

Does the 72t exception to withdraw from Traditional IRA's apply to Roth Ira's also?

 

[Martha]

I am not going to answer your question directly. The way distributions work from Roth IRAs is that there is no tax until you have withdrawn all your contributions. If you converted any traditional IRAs, the conversion contributions are distributed next. After all the regular and conversion contributions are distributed to you, only then do withdrawals come from earnings. These withdrawals are free of tax and penalty if you are over 59.5 and at least five years have passed since you set up your Roth.

So, without looking up the 72t substantially equal payment rules, my guess would be that for most everyone "substantially equal payments" of the earnings would be irrelevant because of how distributions work.

It is possible that you could, after using up your contributions, take 72t distributions of earnings, but I would check publication 590. http://www.irs.gov/pub/irs-pdf/p590supp.pdf

 

[azanon]

The way distributions work from Roth IRAs is that there is no tax until you have withdrawn all your contributions.

I hope you meant to say there is no penalities....., not tax. Money withdrawn from a Roth will never be taxed, be it contributions or earnings, because you already paid taxes in full on that money. Now you could be penalized for withdrawing earnings before being eligible to withdraw them.

Azanon

 

[cute fuzzy bunny]

Earnings on Roth contributions are taxable under many circumstances.

You must hold the Roth for five years AND either be 59.5 or older, take it out for a first home purchase, die or be disabled to withdraw Roth earnings tax free.

And yeah, the thing about french benefits and the leaning tower of pizza.

 

[Martha]

I think I need to be a little less short and sweet in my posts.