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URL:  http://boards.fool.com/moseykitty-writes-i-think-there-are-penalties-11126631.aspx

Subject:  Re: Opening ROTH IRA Date:  8/6/1999  2:46 PM
Author:  Bob78164 Number:  12904 of 78166

moseykitty writes:

I think there are penalties for withdrawing contributions to a Roth that haven't been in place for 5 years (5 year rule?). If true, these would prevent the funds from being used in an emergency.

I reply:

There is such a rule, but it doesn't always apply. There are three ways money can get into a Roth IRA account: (1) annual contribution (limited to $2000 annually), (2) conversion from traditional IRA, and (3) earnings (yaaay!). By operation of law, the first money you remove from a Roth IRA is deemed to consist of annual contributions. Those may be withdrawn at any time without tax or penalty.

Once annual contributions are exhausted, the next withdrawals are deemed to be money converted from traditional IRAs. That's where the five tax-year rule comes in. If withdrawn