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You should not have to pay any tax on a Roth contribution, since you already paid taxes on that money.

Yes, that's correct. The amount that you contributed can be withdrawn without paying taxes or penalties. If you have done conversions, you can withdraw the amount that was converted without paying taxes or penalties after 5 years. See IRS Pub 590-B for ordering rules on contributions and conversions

If you withdraw prior to 59 1/2, you must have held the Roth for 5 years, or you will pay tax on the earnings. Their are exceptions for college expenses and first time home buying, I believe.

Sorry, that's not right. Even if you have had a Roth IRA for at least 5 years, you will pay taxes AND a 10% penalty when withdrawing earnings unless you are over 59 1/2, disabled, it's your beneficiary withdrawing the money after your death, or you meet another exception. See IRS Pub 590-B for exceptions.

Taking a distribution and paying a 10% penalty means you'll have to do at least 11% on your stock investment just to get back to even.

It's not quite that simple. Contributions would be withdrawn tax and penalty free, but earnings would have both taxes and a 10% penalty imposed. So the amount of gain required to 'break even' would depend both on marginal tax rate and how much of the account was earnings vs. contributions. That said, since you can buy individual stocks within a Roth IRA, it makes no sense to take a distribution just to be able to buy individual stocks. Thus Look at rolling over your money into a Roth at a brokerage account (TD Ameritrade, Schwab, etc.). Then you can invest it in stocks and not pay an early withdrawal penalty. is the correct answer.

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