roth ira withdrawl contributions?

[investingnoob]

So I know you can withdraw your contributions in Roth IRA penalty and tax free. But
I was curious as to what happens to the earnings you've made?
Do they stay in your account and keep growing? Or do you just lose it all?

[disneysteve]

So I know you can withdraw your contributions in Roth IRA penalty and tax free. But
I was curious as to what happens to the earnings you've made?
Do they stay in your account and keep growing? Or do you just lose it all?

Your earnings remain in the account.

Keep in mind that withdrawing money from a Roth should only be considered under truly catastrophic circumstances, to save a life or avoid bankruptcy or something equally serious.

[investingnoob]

Thank you Steve

[Stock_Xchange]

Because Roth IRA's are funded with After Tax Dollars, taking the money out before the RMD (requirement Minimum Distribution) period causes penalties to be realized on money that was already taxed.
And your earnings (capital gains and dividend distributions) remain in the account, and are not taxed if they remain unrealized.

[Petunia 100]

Because Roth IRA's are funded with After Tax Dollars, taking the money out before the RMD (requirement Minimum Distribution) period causes penalties to be realized on money that was already taxed. And your earnings (capital gains and dividend distributions) remain in the account, and are not taxed if they remain unrealized.

There is no RMD for Roth IRAs. There is on penalty on early withdrawal of contributions.

[photo]

There is no RMD for Roth IRAs.

That's one of its great advantages!

[jpg7n16]

Because Roth IRA's are funded with After Tax Dollars, taking the money out before the RMD (requirement Minimum Distribution) period causes penalties to be realized on money that was already taxed.

Correction part 2: the money that was already taxed is your contribution amount. This amount may be withdrawn tax and penalty free at any time.

The earnings on that contributed money have never been taxed. And therefore are taxed + penalty if withdrawn before 59 1/2.

You are never taxed twice on the same dollar.

And your earnings (capital gains and dividend distributions) remain in the account, and are not taxed if they remain unrealized.

Correction part 3: It's not if they remain unrealized, it's only if they remain in the account (undistibuted).

Unrealized means you own an investment that's grown in value, but you haven't sold the position yet. When the position is sold, it becomes realized.

My point is, there are no tax consequences to selling an investment within the IRA. There are only tax consequences if you withdraw from the account.

-----------------------------------------

And if you're wondering what order the money comes out in, earnings are always last:

From: Publication 590 (2010), Individual Retirement Arrangements (IRAs)

1. Regular contributions.

2. Conversion and rollover contributions, on a first-in first-out basis (generally, total conversions and rollovers from the earliest year first). See Aggregation (grouping and adding) rules, later. Take these conversion and rollover contributions into account as follows:

....a) Taxable portion (the amount required to be included in gross income because of the conversion or rollover) first, and then the

....b) Nontaxable portion.

4) Earnings on contributions.