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Author: virginiadawg34 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75339  
Subject: Roth distribution question??? Help please Date: 12/5/2001 3:43 PM
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I have a question that I think I know the answer but I would love some foolish confirmation.

I have a ROTH IRA that has been hammered by the market. I have also lost my job, :-( and would like to have some money in the bank for emergincies.

I would like to close our my ROTH as it is below my contribution level, i.e. no earnings or gain. It has 3 years worth of contributions @ $2000 ea and has a current value of aprox $2700 (OUCH). THe IRS web page states that I can take out same year contributions before tax filing for that year, in this case April 15 2002, without penalty. My question is can I close the fund completely without penalty? if there is a penalty is it on the portion outside of the same year contributions?

Any help is appreciated.

Thanks.
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Author: bigcaat Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32732 of 75339
Subject: Re: Roth distribution question??? Help please Date: 12/5/2001 4:14 PM
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I would like to close our my ROTH as it is below my contribution level, i.e. no earnings or gain.

Whoa there, puppy. Why do you want to do that? Do you need the $2700 so deperately that you absolutely can not live without it?

First of all, where is your Roth and what funds do you have in it? Believe me, you are not the only one to get hammered in the last year or so. But why throw the baby out with the bath water? If you sell now, you are assured of taking that loss.

(I am not speaking to the penalty question because I don't know. But, I do think there's a bigger picture.)

The market is cyclical. Look at the history of it. You, like me, had the misfortune of jumping in at the height of a bull market, now we're learning what a sleeping bear is all about. But that's no reason to throw away a retirement fund completely.

IMHO, you'd be better off assessing whether or not you are in the right fund for you and, if you feel that it's not where you want to be, roll it over into something that you're more comfortable in. But to throw that out now only means that you'll have to start all over again, most-likely in a recovered or recovering market.

On the other hand, if you continue to dollar cost average into a good index fund, say VTSMX, for example, you've still got something towards retirement. Even if you can't contribute right away, (I'm sorry about your job) chances are that you will eventually be able to again. (Am I making errant assumptions here?)

I'm probably not making the best case for my point here. I'm sure others on this board can state it more logically. And I know I'm not really answering your question...but I'd really hate to see you do something in haste just because you're feeling the effects of a bear market. I know it's scary, but remember, like I said earlier, you haven't really lost your money until you've sold.

Good Luck,
Caat

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Author: mldorsey1 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32775 of 75339
Subject: Re: Roth distribution question??? Help please Date: 12/7/2001 4:43 PM
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Yes you can take out any or all of your contributions without tax or penalty. Hope you find a job soon. :)

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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32788 of 75339
Subject: Re: Roth distribution question??? Help please Date: 12/10/2001 1:54 PM
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With a Roth IRA, you are allowed to withdraw your contributions, without tax or penalty, at any time. (Different rules apply for conversions from a traditional IRA.)

If you close your IRA completely, there won't be any penalty. However, consider the tax impact: You will have a miscellaneous investing expense of approximately $3300 (you put $6000 in and only got $2700 out). However, there are various thresholds you'll have to meet to be able to deduct that on your taxes. If you have no other investing expenses, or if you don't itemize, that might not gain you anything. Youd have a loss with nothing to show for it.

However, if I were in your situation I'd just move the IRA to a money market account. If an emergency comes up, only withdraw from the IRA as much as needed. Even if you have to withdraw $2699, that $1 still "remembers" your other $3300 worth of contributions.

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Author: virginiadawg34 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32796 of 75339
Subject: Re: Roth distribution question??? Help please Date: 12/11/2001 10:12 AM
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The money market account is a good idea. I hadn't thought about that.

I have several other retirment accounts and just before I was laid off, I had almost cleared out my savings to pay down the bulk of my credit card debt. This is the only account I can feasably access. I have several other rollover accounts etc that would incurs penalty's on redemption.

I was on an AMI plan, JANUS, and have discontinued the payments. It kills me to stop, but I just don't have the cash. I don't think I will need the money, but I need to have it available in case of an emergency (i.e. my car which I was just about to replace, breaking down)

I hate to take the loss more than anything. I do itemize but I would prefer the market to come back :-) just like everyone. I did get burned with Janus by not realizing how much cross investing all of the different plans had. I am trying to clean that up now and this is just a first step.

Pat


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Author: mook11 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32834 of 75339
Subject: Re: Roth distribution question??? Help please Date: 12/18/2001 6:05 PM
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I am sorry if this has been covered before (I am sure that it has, I just could not find it.)
My question has to do with withdrawing from a Roth IRA.
Here is the situation: I have had a ROTH IRA for 3 years. Each year I put in $2,000 for $6,000 of contribution. My total balance is $7400. Can I really withdraw up to $6000 penalty free at any time?
I am sure I cannot, but my co-workers are telling me that i can, at ANY time.

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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32835 of 75339
Subject: Re: Roth distribution question??? Help please Date: 12/18/2001 6:22 PM
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It is indeed true!

However, by doing so you lose the ability of that money to grow tax-free.

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