Pixy,

>>><<Second question: Just to clarify... you're saying if I open a Roth IRA this year with a $2,000 contribution, next year I can withdraw $2,000 without penalty?>>

>Yes, as the present law already specifies.<<<<<<<<

In today's Tax Strategy column by Roy Lewis at http://www.fool.com/School/Taxes/1998/taxes980205.htm there seems to be a contradiction:

"Example 1: Jim, age 35, makes a qualified rollover contribution from his regular IRA to a Roth IRA in the amount of $60,000 on December 30, 1998. Jim is required to spread this income over a four-year period, and is required to report $15,000 per year in 1998, 1999, 2000, and 2001. In January 2003, Jim takes a principal distribution of $40,000. Jim will not be assessed any tax or penalty on this distribution. Why? Because the five-tax year exception has been met.

Example 2: Same facts as above, but assume that Jim takes this $40,000 distribution in 2002. Jim will pay no income tax on this distribution. But, since the five-tax year period was not met, and assuming that none of the penalty exceptions are met, Jim WILL pay a 20% early withdrawal penalty of $8,000 on this distribution. This 20% represents the normal early withdrawal penalty of 10% PLUS the additional 10% early withdrawal penalty assessed against 1998 rollovers."

Roy keeps talking about that five-year period, even when speaking of contributions. Therefore, I'm still not getting it.<g>

orangeblood