How does the process work for getting back funds from a Roth?

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doss
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How does the process work for getting back funds from a Roth?

Post by doss » Fri May 18, 2018 10:10 am

As posted elsewhere in this thread, I want to take a more aggressive approach for retirement planning and plan to keep our emergency fund in various Roth accounts (401k, 403b, Roth IRA).

Lets say that I need to use some of that money (we use Vanguard) -- how do I get it disbursed to me? And, how fast is it? I also have a brokerage account -- do the funds from the Roths get transferred to the brokerage account first and then I can dispense it to my bank account on file?

Never done this before. Thank you.

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Tyler Aspect
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Re: How does the process work for getting back funds from a Roth?

Post by Tyler Aspect » Fri May 18, 2018 11:29 am

I think it is just as simple as selling shares and have the money go to your bank's checking account. You can withdraw your contributions, but its generated earnings should not be withdrawn. However, I would not put the emergency cash in the Roth IRA account because emergency situations may occur more frequently than you suspect.
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David Jay
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Re: How does the process work for getting back funds from a Roth?

Post by David Jay » Fri May 18, 2018 11:39 am

Settlement time from a mutual fund sale is D+1, so it takes 1 day to settle the sale. An ETF or stock sale is D+2

After that, it likely takes 2 days for electronic transfer to your bank account. So it should take place within 3-4 business days - definitely can all be done in a week.

I have a HELOC at my credit union for rapid access to funds (say, to buy a new car). Then I move the money from other places to repay the HELOC. Interest is about ten bucks for 5 days on a $20,000 purchase.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

niceguy7376
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Re: How does the process work for getting back funds from a Roth?

Post by niceguy7376 » Fri May 18, 2018 11:44 am

doss wrote:
Fri May 18, 2018 10:10 am
plan to keep our emergency fund in various Roth accounts (401k, 403b, Roth IRA).
The only accounts that you could withdraw the CONTRIBUTIONS (that too after a min 5 year rule) from the above, WITHOUT A PENALTY is a Roth IRA.

You need to pay a penalty on a Roth 401k and I assume the same applies to Roth 403b
Last edited by niceguy7376 on Fri May 18, 2018 12:39 pm, edited 1 time in total.

doss
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Re: How does the process work for getting back funds from a Roth?

Post by doss » Fri May 18, 2018 11:50 am

niceguy7376 wrote:
Fri May 18, 2018 11:44 am
doss wrote:
Fri May 18, 2018 10:10 am
plan to keep our emergency fund in various Roth accounts (401k, 403b, Roth IRA).
The only accounts that you could withdraw the CONTRIBUTIONS (that too after a min 5 year rule) from the above, WITHOUT A PENALTY is a Roth IRA.

You need to pay a penalty on a Roth 401k and I assume the same applies to Roth 403b
Thanks for the info!

And how does the "five year vesting" work with Roth IRAs? You can't take your money out unless it has been invested for about 5 years? Of course, there are some exceptions like first-time home buyer, etc, right?

geospatial
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Re: How does the process work for getting back funds from a Roth?

Post by geospatial » Fri May 18, 2018 11:50 am

niceguy7376 wrote:
Fri May 18, 2018 11:44 am
doss wrote:
Fri May 18, 2018 10:10 am
plan to keep our emergency fund in various Roth accounts (401k, 403b, Roth IRA).
The only accounts that you could withdraw the CONTRIBUTIONS (that too after a min 5 year rule) from the above, WITHOUT A PENALTY is a Roth IRA.

You need to pay a penalty on a Roth 401k and I assume the same applies to Roth 403b
The 5-year rule applies to withdrawing earnings in a Roth IRA, not the contributions.

niceguy7376
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Location: Metro ATL

Re: How does the process work for getting back funds from a Roth?

Post by niceguy7376 » Fri May 18, 2018 12:38 pm

geospatial wrote:
Fri May 18, 2018 11:50 am
The 5-year rule applies to withdrawing earnings in a Roth IRA, not the contributions.
I am then wrong.

rob65
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Re: How does the process work for getting back funds from a Roth?

Post by rob65 » Fri May 18, 2018 1:08 pm

niceguy7376 wrote:
Fri May 18, 2018 12:38 pm
geospatial wrote:
Fri May 18, 2018 11:50 am
The 5-year rule applies to withdrawing earnings in a Roth IRA, not the contributions.
I am then wrong.
Note that Roth conversions do have a 5 year waiting period. I think the two different 5 year rules contribute to the confusion.

https://www.kitces.com/blog/understandi ... nversions/

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David Jay
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Re: How does the process work for getting back funds from a Roth?

Post by David Jay » Sat May 19, 2018 2:46 pm

rob65 wrote:
Fri May 18, 2018 1:08 pm
niceguy7376 wrote:
Fri May 18, 2018 12:38 pm
geospatial wrote:
Fri May 18, 2018 11:50 am
The 5-year rule applies to withdrawing earnings in a Roth IRA, not the contributions.
I am then wrong.
Note that Roth conversions do have a 5 year waiting period. I think the two different 5 year rules contribute to the confusion.

https://www.kitces.com/blog/understandi ... nversions/
Kitces does not mention one additional condition (his blog post was focused on pre-retirement questions): at 59.5 and a Roth open for 5 years, ALL distributions are qualified. Including conversions.

This is why I recommend everyone get a Roth open in 2018, to start the clock.
Last edited by David Jay on Wed May 23, 2018 6:41 pm, edited 1 time in total.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

sc9182
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Re: How does the process work for getting back funds from a Roth?

Post by sc9182 » Sat May 19, 2018 4:56 pm

David Jay wrote:
Sat May 19, 2018 2:46 pm
rob65 wrote:
Fri May 18, 2018 1:08 pm
niceguy7376 wrote:
Fri May 18, 2018 12:38 pm
geospatial wrote:
Fri May 18, 2018 11:50 am
The 5-year rule applies to withdrawing earnings in a Roth IRA, not the contributions.
I am then wrong.
Note that Roth conversions do have a 5 year waiting period. I think the two different 5 year rules contribute to the confusion.

https://www.kitces.com/blog/understandi ... nversions/
Kitces does not mention one additional condition (his blog post was focused on pre-retirement questions): at 59.5 and a Roth open for 5 years, ALL distributions are qualified. Including conversions.

Theo is why I recommend everyone get a Roth open, to start the clock.
Action item: Will open Roth acct at or just prior to age 54.5 to qualify for 59.5 .. may be convert some $$s during low AGI year(s)..

Thx

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