adding and then taking out money to roth ira

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adding and then taking out money to roth ira

Postby ketanco » Fri Jul 26, 2013 9:42 pm

Hello,
I am thinking about putting anpther 5K to my roth IRA this year but later this year i may need that money. they told me that i can take out my principal anytime without any paperwork or fees or taxes or penalties is that ok?

and do you think keeping that 5K there for now makes sense, since it will generate tax free earnings? i have enough savings/income now that i dont need that 5 K right now... please advice..
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Re: adding and then taking out money to roth ira

Postby LifeLearner » Fri Jul 26, 2013 9:44 pm

I'm not sure about the specifics of what you're allowed to draw and whether or not there are any associated penalties. I think you're right, though, in that you can withdraw the principal.

BUT
that means you are banking on whatever funds you have in your Roth IRA necessarily generating a return in that time frame. If you need the 5k no matter what, I'd suggest something with less risk -- maybe a CD or some high yield savings account.
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Re: adding and then taking out money to roth ira

Postby Kevin M » Fri Jul 26, 2013 10:05 pm

Yes, you can withdraw the contributions to a Roth without taxes or penalties (but not the earnings). There may be a little additional tax reporting--I think you'll receive a 1099-R for the distribution, but the code will indicate no tax is due. I'm sure someone will chime in if I'm wrong.

However, if it's likely you'll need the money later in the year, there's little point in doing so. You'll earn next to nothing on a safe investment, and you may lose money in a risky investment, so unless you want to roll the dice, don't bother. However, if there's a good chance you won't need the money, then sure, why not.

Kevin
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Re: adding and then taking out money to roth ira

Postby rr2 » Sun Jul 28, 2013 1:21 pm

ketanco wrote:Hello,
I am thinking about putting anpther 5K to my roth IRA this year but later this year i may need that money. they told me that i can take out my principal anytime without any paperwork or fees or taxes or penalties is that ok?

and do you think keeping that 5K there for now makes sense, since it will generate tax free earnings? i have enough savings/income now that i dont need that 5 K right now... please advice..

Just keep it in a short term savings account for now. You have until tax day next year to contribute to this years IRA.
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