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Greetings, Mook11, and welcome. You asked:

I have asked this question before and now am really confused. I was under the impression that if I put $2,000 in my 2001 Roth IRA, that money could be accessed by me at any time without penalty (assuming the investment retained its value or grew.) I was told that only the EARNINGS were subjected to taxes and penalties. However, I just read an article at:
http://money.cnn.com/2002/04/23/pf/saving/q_emergency/index.htm
and it said :
"You can't just withdraw contributions from a Roth whenever you feel like it. Your contributions must have been in the account for at least 5 years before you're exempt from penalties. "
"And under IRS rules, contributions can be withdrawn only for specific purposes, like the purchase of your first home, unreimbursed medical expenses that exceed 7.5 percent of AGI, and qualified higher education expenses, without incurring penalties."

Is this the case??


No, it is NOT the case, and the article at money.cnn.com is -- at best -- incomplete. You may take your regular (i.e., annual) contributions at ANY time for ANY purpose free of income taxes and penalty. It's only when you get into conversion contributions and earnings that you may possibly incur income taxes and a penalty for withdrawal prior to age 59 1/2.

In general, ordering rules for IRA withdrawals stipulate that the money comes first from regular/annual contributions, next from conversion contributions from the oldest to the youngest, and last from earnings. Regular contributions will NEVER be included in income for the year, but after those contributions are gone the money from the other sources must be considered part of a qualified withdrawal to avoid taxes and/or penalty. For conversion money, the wait is five years and for earnings the wait is five years after the Roth is opened AND the attainment of age 59 1/2 unless another exception is met.

For a full discussion of the issue, see pages 55 through 58 of IRS Publication 590 (Individual Retirement Arrangements) available for download at http://www.irs.ustreas.gov/forms_pubs/pubs.html.

Regards..Pixy
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