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Subject:  Re: IRA timeline Date:  8/15/1999  9:33 AM
Author:  TMFPixy Number:  13152 of 88435

Goodjoan writes:

<<My husband has money sitting in a retirement plan that was mandatory at his old job. It's been pulling in a whopping 4%/year. Thanks to all of you convincing him that (I was right and) he shouldn't close the account, take the penalty and use the money for a small remaining CC debt, we plan to roll the money into a traditional IRA and invest it a little more aggressively, since we have more than 30 years to retirement. With his new job we will also be moving and we are discussing buying a house in the next 3-5 years. (Hopefully sooner but thats an argument for another day)

My question- I know you can borrow from an IRA for a qualified first time home purchase after 5 years. Will rolling over the money start the clock over again? Or is the account considered as old as it's earliest contribution? The old account is more than 5 years old but is Not a traditional IRA or 401k and I don't believe we can withdraw from it at all without penalty, except to roll it out to another account. >>

Your hubby's retirement money will be transferred to a traditional IRA when he changes jobs. One of the exceptions to a penalty-free withdrawal from that IRA is for a "first home" purchase. "First home" means you haven't owned one in the two years prior to the withdrawal. If you meet that condition, then you may take money from your IRA regardless of when it was opened or how long the money has been in the account. The amount you may withdraw is limited to $10K, and is a lifetime limit. Once taken, it may not be returned to the IRA, so it is not a "loan", and you are not "borrowing" the money. You can't borrow from any IRA. Thus, you are making a withdrawal. The amount will be taxed, but it will not be subject to the early withdrawal penalty.

You seem confused about the difference between retirement plans and IRAs, the difference between traditional and Roth IRAs, and the difference between a rollover/conduit and regular IRAs. A quick review of my Foolish Retirement Plan Primer available at may help eliminate some of the questions you have.

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