Roth IRA Withdrawal Questions
Roth IRA Withdrawal Questions
Hello,
I am looking to withdraw around 6K from my Vanguard Roth IRA- total value about 75K. I have had this Roth IRA for about 15 years.
I understand that the money I have CONTRIBUTED to this Roth IRA can be withdrawn penalty/tax free. Over the 15 years I have had this Roth IRA, the amount I have contributed easily exceeds 6K.
Questions: If I withdraw the 6K, how do I specify that I want 100% of this to be from contributions, as opposed to earnings? Is this even possible to ensure I have no penalties?
If what I would like to do is possible, how would the transaction transpire? Would shares of the Vanguard mutual funds that my Roth IRA is invested in be sold?
Thanks!
I am looking to withdraw around 6K from my Vanguard Roth IRA- total value about 75K. I have had this Roth IRA for about 15 years.
I understand that the money I have CONTRIBUTED to this Roth IRA can be withdrawn penalty/tax free. Over the 15 years I have had this Roth IRA, the amount I have contributed easily exceeds 6K.
Questions: If I withdraw the 6K, how do I specify that I want 100% of this to be from contributions, as opposed to earnings? Is this even possible to ensure I have no penalties?
If what I would like to do is possible, how would the transaction transpire? Would shares of the Vanguard mutual funds that my Roth IRA is invested in be sold?
Thanks!
Re: Roth IRA Withdrawal Questions
You don't specify, the IRS requires that you distribute contributions until they are exhausted, then conversions by year, and only after both contributions and conversions are exhausted do they start counting the earnings. It is just a matter of the totals, then anything in excess of contributions and conversions is earnings.
Unless you have cash holdings, yes, you will have to sell shares.
Unless you have cash holdings, yes, you will have to sell shares.
Last edited by sailaway on Mon Jul 26, 2021 12:54 pm, edited 1 time in total.
Re: Roth IRA Withdrawal Questions
Are you older than 59 1/2? If so, it's all tax free so it wouldn't matter.
Re: Roth IRA Withdrawal Questions
Since you will have to report this distribution on Form 8606 unless your Roth is already qualified, you will have had to keep track of your Roth IRA regular contribution basis, since that figure goes on line 22 of Form 8606.The distribution is tax and penalty free as long as the line 22 amount exceeds your distribution.sailaway wrote: ↑Mon Jul 26, 2021 12:31 pm You don't specify, the IRS requires that you distribute contributions until they are exhausted, then conversions by year, and only after both contributions and conversions are exhausted do they start counting the earnings.
Unless you have cash holdings, yes, you will have to sell shares.
If you do not know the figure other than it exceeds 6000, and take a guess for line 22, it may or may not work out in the long run. The IRS could beef up it's IRA oversight in the future if they hire enough agents, so attempt to determine your regular Roth IRA basis if you can. You should keep Form 5498 that reports all your Roth regular contributions, conversions, and rollovers from employer plans. If you have had the same custodian from the start, they may be able to recover the info. Tax software can also capture this data, if it is entered each year.
Re: Roth IRA Withdrawal Questions
Your direct contributions are available any time with no penalty or tax. If you have made contributions through Roth conversions (or the "backdoor" process), it can be more complicated.
You don't specify. The IRS has a designated order....they specify for you. Contributions come out first. Earnings come out last. Conversions in the middle.Questions: If I withdraw the 6K, how do I specify that I want 100% of this to be from contributions, as opposed to earnings? Is this even possible to ensure I have no penalties?
As mentioned by Alan, a withdrawal from Roth is documented on your taxes - Form 8606. Don't just take money out knowing that you have put more than $6k in there. Make an exact list of all contributions if you can or compile your best guess knowing that you may have to live with that best guess until age 59.5.
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Re: Roth IRA Withdrawal Questions
Age 55 if the person quits/retires/gets laid off correct?retiredjg wrote: ↑Mon Jul 26, 2021 1:44 pmYour direct contributions are available any time with no penalty or tax. If you have made contributions through Roth conversions (or the "backdoor" process), it can be more complicated.
You don't specify. The IRS has a designated order....they specify for you. Contributions come out first. Earnings come out last. Conversions in the middle.Questions: If I withdraw the 6K, how do I specify that I want 100% of this to be from contributions, as opposed to earnings? Is this even possible to ensure I have no penalties?
As mentioned by Alan, a withdrawal from Roth is documented on your taxes - Form 8606. Don't just take money out knowing that you have put more than $6k in there. Make an exact list of all contributions if you can or compile your best guess knowing that you may have to live with that best guess until age 59.5.
Re: Roth IRA Withdrawal Questions
To my knowledge, age 55 has nothing to do with Roth IRA. You may be thinking about withdrawals from a 401k (and similar) plan at an employer from which you retire in or after the year you reach age 55.helloeveryone wrote: ↑Mon Jul 26, 2021 2:11 pm Age 55 if the person quits/retires/gets laid off correct?
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Re: Roth IRA Withdrawal Questions
Oh yes - I rechecked and it said that applies to 401k or 403b.retiredjg wrote: ↑Mon Jul 26, 2021 2:15 pmTo my knowledge, age 55 has nothing to do with Roth IRA. You may be thinking about withdrawals from a 401k (and similar) plan at an employer from which you retire in or after the year you reach age 55.helloeveryone wrote: ↑Mon Jul 26, 2021 2:11 pm Age 55 if the person quits/retires/gets laid off correct?
thanks!