Roth IRA question

[Gooberlx2]

Any tax/financial people who can help with this question?

I'm considering pulling money from my Roth IRA for a first home loan. For the withdrawal to be penalty free, the Roth has to have been open for 5 years, according to kiplinger.com. However, fool.com goes a little further and defines it as 5 "tax-years".

My Roth IRA started in October, 2003. So does that make it 5 tax-years old (returns for '03, '04, '05, '06 and '07)? Or would I need to wait until this October to use it?

 

[sactoking]

Only partially on topic, withdraw only the principal you've invested and leave the capital gain in the account. No taxes, no matter how long the account's been open, since the money was 'after-tax' money to begin with.

 

[UnbalancedCheckbook]

I'm pretty sure that the "5 tax years" means the account has to exist for five full years of taxation. So, in your case, that clock would start counting on April 15 of 2004. So it's not even until this October you could use it... you'd have to wait until next April.

I think.

 

[oznerol]

It is 5 tax years. The best way to think of it is like this - if you contributed for the 2003 tax year (any time before April 16, 2004), it is like contributing January 1, 2003.

So on January 1, 2008 you have reached the 5 year mark and can freely withdraw the money on a qualifying first home purchase.

 

[hellfreeze]

Originally posted by: ducci
It is 5 tax years. The best way to think of it is like this - if you contributed for the 2003 tax year (any time before April 16, 2004), it is like contributing January 1, 2003.

So on January 1, 2008 you have reached the 5 year mark and can freely withdraw the money on a qualifying first home purchase.

what if he contributed in 2003 but not any of the years after? does it get counted as 1 year or 5?

 

[oznerol]

Originally posted by: hellfreeze

Originally posted by: ducci
It is 5 tax years. The best way to think of it is like this - if you contributed for the 2003 tax year (any time before April 16, 2004), it is like contributing January 1, 2003.

So on January 1, 2008 you have reached the 5 year mark and can freely withdraw the money on a qualifying first home purchase.

what if he contributed in 2003 but not any of the years after? does it get counted as 1 year or 5?

Doesn't matter how many years you contribute to it - just the year of opening the account.

So to answer your question - 5 years.

 

[hellfreeze]

Originally posted by: ducci

Originally posted by: hellfreeze

Originally posted by: ducci
It is 5 tax years. The best way to think of it is like this - if you contributed for the 2003 tax year (any time before April 16, 2004), it is like contributing January 1, 2003.

So on January 1, 2008 you have reached the 5 year mark and can freely withdraw the money on a qualifying first home purchase.

what if he contributed in 2003 but not any of the years after? does it get counted as 1 year or 5?

Doesn't matter how many years you contribute to it - just the year of opening the account.

So to answer your question - 5 years.

awesome. guess the $80 contribution last year was worth it :beer:

guess i'll start taking it more seriously once I turn 23

 

[Gooberlx2]

Originally posted by: ducci

Originally posted by: hellfreeze

Originally posted by: ducci
It is 5 tax years. The best way to think of it is like this - if you contributed for the 2003 tax year (any time before April 16, 2004), it is like contributing January 1, 2003.

So on January 1, 2008 you have reached the 5 year mark and can freely withdraw the money on a qualifying first home purchase.

what if he contributed in 2003 but not any of the years after? does it get counted as 1 year or 5?

Doesn't matter how many years you contribute to it - just the year of opening the account.

So to answer your question - 5 years.

Excellent, thanks ducci. That's what I suspected....I just wanted cursory "feel good" confirmation until my investments manager gets back from vacation. I did make my first contribution for the 2003 tax year.