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Hi. You asked:

"I am considering opening a Roth IRA specifically for the purpose of saving for a down payment on a home (first time home buyer).

"just to make sure I'm understanding things correctly--if I open the IRA now, before April 15, I can make contributions that will count for tax year 2000, thus making the "5 year rule on withdrawls of earnings" count from year 2000, rather than 2001...this will also enable me to contribute whatever I can (up to $2000) before April 15, then another $2000 for tax year 2001.....right?

"Also, if I so happen to save enough before 5 yrs, I can, conceivably, withdrawl all contributions (but not EARNINGS) without any tax consequences....correct?

"because of the 5 year rule on withdrawl of earnings, in order to get the account opened for tax year 2000, I want to open the account (with just a few hundred dollars) now, even though I still have a little high interest credit card debt...which I plan on Foolishly getting rid of over the next 6 mos or so :-)

"One more thing---should I wait until after I open the Roth IRA to file my 2000 taxes? (ie--because of the 5 year rule and getting the account opened with year 2000 contributions)

"I think I've got it all figured out....just wanted to double check with you guys to make sure.

"any info/advise is appreciated!"

I checked most of your questions on the www.rothira.com web site and I believe you have it exactly right. Making any contribution before April 15, 2001, and designated as a year 2000 contribution to a Roth IRA, starts the 5 year clock ticking as of Jan 1, 2000. As it turns out, if you actually do contribute $2000 each year for 5 years, that is exactly the maximum that you can take out for purposes of financing a house (i.e., $10,000). All the interest earned over the five years will have to stay in there to avoid taxes until you are 59 1/2. If you were to take it out before age 59 1/2, you would owe taxes on it, and if you took it out prior to Jan 1, 2005, you would also owe a 10% penalty on that amount.

As to the tax return issue, I believe that is irrelevant since Roth IRAs are not reported on your tax return. I'm pretty sure that's right.

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