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After we did this I realized that I could do better with my stocks and my current 401K plan at work and have not contributed anything to these accounts since they were started in 2007.

That's questionable. I mean, from what you've suggested, you left money just sitting in
an account for several years without doing anything with it

I got a letter stating that since these accounts are under $500, they can liquidate the accounts with a 10% federal income tax and additional 10% penalty for being under 59 1/2. I do not really want to throw more money at a bad investment by keeping the balance above $500.

Is the letter from your broker or from your financial advisor? I think you need to terminate
your relationship with that party. By the sounds of it, your Roth IRA only has the equivalent
of Roth contributions. There is no penalty on early withdrawal of Roth IRA contributions.
If the account is indeed a Roth IRA, the 10% income tax penalty is also suspect/wrong?
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