Author Topic: Roth IRA Withdrawal  (Read 268 times)

Lanthiriel

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Roth IRA Withdrawal
« on: September 07, 2017, 03:51:34 PM »
I'm going to get face punches for this, so let's get it out of the way: I'm impatient and it costs me money. I know.

When I sold House 1 earlier this year, I put $11,000 in my husband's Roth IRA account for 2016 and 2017 and $5500 in mine for 2017. We then decided to buy a house four months later (I know, I know), so I pulled $5500 from his account and $5500 from mine. I read A LOT of info online about you can withdraw contributions without penalty at any time, but a discussion in the Relatives Who Just Don't Get It thread is sending me for a tailspin. Questions:

1. Do I owe a 10% penalty on the $5500 I withdrew from my account?
2. Do I only have 60 days to put back my husband's 2017 contribution? Or can I do it any time before the end of the year? Vanguard seems to think I can't do it at all as it's blocking my ability to add money to that account because I've maxed out for the year.

Advice/help is appreciated!

Catbert

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Re: Roth IRA Withdrawal
« Reply #1 on: September 07, 2017, 05:34:24 PM »
1.  No you'll owe no penalty or tax.

2.  Not sure, but I think you're toast for 2017.

You can always take out Roth contributions without penalty.  For rollovers from tIRA to Roth you have to wait 5 years.  (It's a rollover, not a contribution.)

There is no 60 day re-pay window on Roth's.  That 60 day "loan" is only for traditional IRAs.  I'm not sure, but I think that once you take our even the current year's contribution you're not allowed to repay.

Lanthiriel

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Re: Roth IRA Withdrawal
« Reply #2 on: September 07, 2017, 05:40:35 PM »
1.  No you'll owe no penalty or tax.

2.  Not sure, but I think you're toast for 2017.

You can always take out Roth contributions without penalty.  For rollovers from tIRA to Roth you have to wait 5 years.  (It's a rollover, not a contribution.)

There is no 60 day re-pay window on Roth's.  That 60 day "loan" is only for traditional IRAs.  I'm not sure, but I think that once you take our even the current year's contribution you're not allowed to repay.

Thank you! Reading IRS law is rough.

MDM

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Re: Roth IRA Withdrawal
« Reply #3 on: September 07, 2017, 06:48:29 PM »
Here is some IRS guidance for Withdrawals of contributions by due date:
Quote
If you withdraw contributions (including any net earnings on the contributions) by the due date of your return for the year in which you made the contribution, the contributions are treated as if you never made them. ... The withdrawal of contributions is tax free, but you must include the earnings on the contributions in income for the year in which you made the contributions.

Based on that, and sections of articles such as Can I Redeposit Early Withdrawn Contributions in My Roth IRA?, it appears the IRS will allow you to recontribute for 2017.

It is not clear whether you must first withdraw any net earnings, or whether you may also withdraw any net earnings.  Either way the earnings will be taxable but not penalized.

Probably worth a call to Vanguard.