Liquidating roth ira rules

Therefore, a ,000 withdrawal would include 0 in taxable earnings, which would need to be included in the gross annual income reported to the IRS on your taxes.You can also avoid taxation on your earnings if your withdrawal is for the purposes of a rollover.

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If you had any gains, you would not be able to withdraw those for your first home purchase without incurring the taxes and penalties because of the five-year rule.

In order to make a nonprincipal withdrawal from a Roth IRA without incurring any penalties, it must meet the requirements of being a “qualified distribution.” The first rule is this five-year rule we have discussed: The money being withdrawn must exceed a five-year tax period.

I have been finding mixed information regarding penalties on this sort of transaction.

What are the Roth IRA withdrawal rules to buy a first home?

So your $5,000 principal has already been taxed before going into the Roth IRA.

Therefore, it can be withdrawn at any time without paying any additional tax or penalty.In addition, the terms of Roth 401(k) accounts stipulate that distributions must begin by age 70 1/2 or when the account holder retires, whichever comes later.If the account holder owns a 5 percent or larger share of the employing company, distribution must begin at age 70 1/2 regardless of employment status.I have roughly the same balance in my Roth IRA as what I contributed to it.Some investments have gained money and some have lost money.If the funds are simply being moved into another retirement plan or into a spouse's plan via direct rollover, no additional taxes are incurred.

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