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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75797  
Subject: Re: 1999 ROTH IRA? Date: 4/10/1999 8:53 AM
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Nikhil Bhat asks:

<<1. Is it true that I can contribute 2000$ for myself and 2000$ for my wife [my wife is a home maker with no earned income], i.e a total of $4,000 for the year 1998 if I open an account before April 15th, 1999? >>

Yes, it is provided you have sufficient earned compensation (i.e., job wages) to do so. Your contributions may or may not be deductible depending on participation in retirement plans at work, Adjusted Gross Income, and filing status. If they must be nondeductible, then a Roth IRA is the way to go unless your AGI exceeds the limits for a Roth contribution. If it does, all you can use is a nondeductible traditional IRA.

<<2. So we can also contribute $4000 to the 1999 ROTH IRA within 1999 or before April 15th 2000?>>

That's correct.

<<3. After 5 years we intend to buy our first home, In that case we can WITHDRAW $10,000 or $20,000 since both of us would have contributed to the ROTH IRA?>>

You may take your contributions from a Roth at any time free of penalty or tax. If you both make $2K annual contributions, in five years you both may take all that $10K. Note that the withdrawal of contributions does not affect your $10K lifetime limit for a home purchase. Thus, you may go on to take earnings as well. Withdrawal of earnings does count against the $10K limit. However, as a qualified distribution from the Roth, they will not be taxed or penalized. In theory, then, if your accounts grew to at least $20K each through contributions and earnings, you could both take $20K towards that home purchase.

<<Finally basic question: If I open a ROTH IRA account with E*Trade and buy x amount of stock of Y company which would cover my $2000(incl comm, after 5 years when I sell my sale price has to be $20,000 or less to ensure no penalties right? But can I not withdraw the $20,000 (original contribution for both of us for 5 years) and additional $20,000 in earnings for both of us if we buy a house?>>

See the previous answer. The $10K limit only applies to earnings, not your contributions. You both may take up to $20K each in five years assuming the accounts grow that fast. $10K would consist of your original contributions, and the other $10K would be a withdrawal from earnings.

Regards..Pixy
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