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Author: PanhandleTex Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75821  
Subject: Removing intial contributions from Roth Date: 3/27/2005 9:28 PM
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After getting serious about my retirement investments I have decided to cut my 401K contributions to just enough to get full benefit of the company match. The difference is right to meet teh maximum for a Roth IRA, which tome would be wiser ionvesting thanputting it all in the 401K. My problem though is that I am unsure of the company I am working for at present. We have had, well, several layoffs over the past few years including one so far this year, and well, frankly I am just not sure that the company is going to be around a lot longer. So at present I am putting my "contributions" for my Roth into an ING account. I am a little luneasy however that if the company goes belly up I'll need the money to move with because I am at present living in a samll town in frankly the middle of nowhere (Nearest Walmart 40 miles, nearest airport 100 miles) So at the eand of the year if I take the money out of my ROTH ING account and start a ROTH, then get laid off or the company goes bankrupt can I take my contribution(s) out of the Roth and use it? I am worried about the company, but I would like to have it both ways. Who wouldn't. :-)
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Author: Mark0Young Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 45286 of 75821
Subject: Re: Removing intial contributions from Roth Date: 3/27/2005 10:10 PM
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can I take my contribution(s) out of the Roth and use it?

Yes, you can take your regular contributions out of the Roth IRA at any time, for any purpose, without any tax or penalties. However, earnings (moneys beyond the regular contributions) have certain rules before they can be withdrawn without penalties.

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Author: stardustangel Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 45287 of 75821
Subject: Re: Removing intial contributions from Roth Date: 3/27/2005 10:54 PM
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Yes, you can take your regular contributions out of the Roth IRA at any time, for any purpose, without any tax or penalties.


Only after you have had a ROTH for 5 years can you do that.

But as an aside, forget about the ROTH and work towards an emergency fund if you're that worried about your job.

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Author: 3muttsmom Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 45288 of 75821
Subject: Re: Removing intial contributions from Roth Date: 3/27/2005 11:26 PM
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stardustangel:

Only after you have had a ROTH for 5 years can you do that.

This is incorrect. Regular contributions CAN be taken out at any time, as Mark0Young stated. It's monies that have been CONVERTED from a TIRA that have the 5 year waiting period.

However, the OP should work toward the emergency fund first, especially if the job is unstable.

3MM


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Author: Mark0Young Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 45291 of 75821
Subject: Re: Removing intial contributions from Roth Date: 3/27/2005 11:54 PM
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Only after you have had a ROTH for 5 years can you do that.

From http://www.irs.gov/taxtopics/tc309.html
Distributions that are a return of your regular contributions are tax–free.

From http://www.irs.gov/newsroom/article/0,,id=134667,00.html
you do not include in your gross income, and therefore are not taxed on, any qualified distributions or distributions that are a return of your regular Roth IRA contributions ...

From http://www.fool.com/taxes/2005/taxes050128.htm
Fourth, distributions of Roth IRA contributions are always tax-free, no matter when they are taken.

From http://www.board.fairmark.com/board1/messages/32510.htm
All the withdrawal rules are in IRS Pub 590 and on this site.

http://fairmark.com/rothira/gendist.htm

1 - Per the ordering rules, your non-rollover contributions (annual additions) are withdrawn first. These funds are free of tax (already paid) and penalty.


All of the above (except the part of your message I quoted) are in agreement with IRS Publicatio 590 (Year 2004 edition), page 60, Worksheet 2-3 when you figure out how much of your Roth IRA distribution is taxable--the return of regular contributions are subtracted off.


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Author: PanhandleTex Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 45298 of 75821
Subject: Re: Removing intial contributions from Roth Date: 3/28/2005 10:01 AM
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Thank you for your input. That was what I thought, I just wanted to make sure. As I understand it, the contributions you have to wait 5 years for are when you convert a Traditional IRA to a Roth IRA.

I hav an Efund that I am working on expanding. By the end of the year it should be well over $5,000 I am already halfway to that goal. M worries about job security, which are not unfounded are one of the reasons I am keeping my Roth contributions in an ING account. Tho if by the end of the year with a $5,000 Efund and I am still here, as well as the company I feel that by putting the Roth acccount money into the Roth I am having it both ways. The worst happens I have the Efund so I am not just hanging out there, an I can tap my Roth contributions if I end up needing it for a looong distance move. Is this as feasible as I think it is, or should I just make a really healthy Efund?

Thanks for all your help

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Author: 2old4bs Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 45303 of 75821
Subject: Re: Removing intial contributions from Roth Date: 3/28/2005 11:59 AM
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I hav an Efund that I am working on expanding. By the end of the year it should be well over $5,000 I am already halfway to that goal...The worst happens I have the Efund so I am not just hanging out there, an I can tap my Roth contributions if I end up needing it for a looong distance move. Is this as feasible as I think it is, or should I just make a really healthy Efund?

The size of your efund is determined by many variables that are often unique to each individual, such as your age, monthly living expenses, ease of obtaining comparable job at comparable salary, etc. The general rule is that at least 6 months of living expenses should be in an e-fund. Maintaining health insurance via COBRA while unemployed, for example, can add quite a chunk to monthly living expenses. I myself maintain a 12 month efund, due to both my age, and the unlikelihood of obtaining a comparable job at comparable salary. Only you can determine how much you need in your own e-fund, but I can't stress the importance of having sufficient funds in it, particularly in the tenuous job situation you perceive yourself to be in.

If, at the end of the year, you determine that your job is far 'safer' than you now think, you can re-visit the decision and move some of the e-fund money into a Roth.

2old


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Author: PanhandleTex Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 45304 of 75821
Subject: Re: Removing intial contributions from Roth Date: 3/28/2005 12:12 PM
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If, at the end of the year, you determine that your job is far 'safer' than you now think, you can re-visit the decision and move some of the e-fund money into a Roth.

Sounds like a plan. It's about the way I was looking at it. I am also working on getting rid of all debt at so that I will have fewer or smaller payments.

Much thatnks for all of the time and patience and good advice.


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Author: 2old4bs Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 45306 of 75821
Subject: Re: Removing intial contributions from Roth Date: 3/28/2005 12:40 PM
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I am also working on getting rid of all debt at so that I will have fewer or smaller payments.

Good idea. Getting rid of high-cost debt (i.e. credit card and high interest loans) and staying rid of them is the best thing you can do to ensure your financial future.

Much thatnks for all of the time and patience and good advice.

I like to think that I am helping others to learn from my experiences (admittedly extremely reckless at times).

Good luck!

2old


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Author: stardustangel Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 45307 of 75821
Subject: Re: Removing intial contributions from Roth Date: 3/28/2005 1:15 PM
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Thanks for the correction. I erroneously thought the 5 year rule was applicable to all ROTH accounts.

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