Author Topic: Withdraw Roth IRA contributions?  (Read 2455 times)

themagicman

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Withdraw Roth IRA contributions?
« on: July 30, 2015, 09:08:01 AM »
Before I started reading MMM I invested only in roth IRA's. Since then I have discovered traditional IRAs/401ks would be better for my situation. I was wondering if anyone thought it would be a good idea to take out all of my roth IRA contributions (About $30k of the 40k in the account) and use the funds to into maxing out my 401ks,403B ect? This would be over several years as I do not have enough tax advanced space for all of the 30k. I am currently in the 15% bracket for federal and 6% for my state.

seattlecyclone

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Re: Withdraw Roth IRA contributions?
« Reply #1 on: July 30, 2015, 09:17:18 AM »
The 15% federal bracket is what many people here think is sort of the borderline where either Roth or traditional might make just as much sense. Given that, you might as well leave your Roth money invested and just contribute as much to traditional as you can going forward.

frugaliknowit

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Re: Withdraw Roth IRA contributions?
« Reply #2 on: July 30, 2015, 09:18:50 AM »
If you are in the 15% bracket, why would you want to defer taxes?  What makes you think you will be in a lower tax bracket when you withdraw the money?

You can "recharacterize" any 2015 money you have put in your Roth, I believe (verify with your accountant or the IRS).

Gone Fishing

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Re: Withdraw Roth IRA contributions?
« Reply #3 on: July 30, 2015, 09:23:28 AM »
Better yet, reduce your spending so you can max accounts out of your current income.

If you are in the 15% bracket, why would you want to defer taxes?  What makes you think you will be in a lower tax bracket when you withdraw the money?

You can "recharacterize" any 2015 money you have put in your Roth, I believe (verify with your accountant or the IRS).

Can't speak for the OP, but it seems many early retirees find themselves in the 0-10% brackets.

It is also not too late to recharacterize 2014 contributions (deadline is 10/15), you would just need to file an amended return to get your refund.

forummm

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Re: Withdraw Roth IRA contributions?
« Reply #4 on: July 30, 2015, 10:17:13 AM »
Leave that money in the Roths. It's tax-free growth for decades!

themagicman

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Re: Withdraw Roth IRA contributions?
« Reply #5 on: July 30, 2015, 10:36:49 AM »
If you are in the 15% bracket, why would you want to defer taxes?  What makes you think you will be in a lower tax bracket when you withdraw the money?

Our spending is about 23k, so I expect to be in the 0% bracket or maybe just a little bit in the 10%.
Better yet, reduce your spending so you can max accounts out of your current income.


Trying to get it down but we have a ton of tax advantaged space! (About $75k)
We are using a lot of it but not able to quite get all!

BarkyardBQ

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Re: Withdraw Roth IRA contributions?
« Reply #6 on: July 30, 2015, 10:45:05 AM »
I would just move forward with leaving the Roth alone. Yes you could contribute more to tax deferred while you spend the cash but you will eventually run out and be back to contributing only what you can. Meanwhile you will have locked those contributions away in accounts you can't touch for years (either FI/rollover or 59.5), but right now that 30k is a decent emergency fund working very hard to earn you tax free dollars.

Gone Fishing

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Re: Withdraw Roth IRA contributions?
« Reply #7 on: July 30, 2015, 11:18:40 AM »
Also don't forget you will need enough regular ROTH contributions and or taxable investements to fund the first 5 years of your retirement before the IRA ladder "matures".