Understanding Roth IRA Withdrawal Rules

[@RajReviewsDualSportPhotoGadget]

Most clear and complete explanation on KZbin.👍

[@buckweat420]

I do all my trading on the toilet too. I am glad this video was recorded in the bathroom.

[@RetirementPlanningEducation]

I’m good at multitasking

[@minostro]

Wow, finally someone explained it the rules in such clear way!! Thank you🎉 -some CPAs told me that I have to wait 5 years before taking the contribution part (after tax) of my Roth 401K -> Roth IRA, and I was sure they were wrong. And you confirmed it!

[@wichitazeb]

Excellent breakdown of the rules.

[@stirlingblackwood]

7:29 I thought withdrawing gains to buy your first home still incurred taxes, but no penalties.

[@RetirementPlanningEducation]

Per the bottom right of page 31 of IRS Publication 590-B, the first time home expense thing qualifies to be an "qualified distribution" IF the person's first Roth IRA meets the five-year rule. If the first Roth IRA doesn't meet the five-year rule, then there would be tax on the first time home distribution (but no penalty). www.irs.gov/pub/irs-pdf/p590b.pdf

[@tomc9069]

Please confirm the following (as I have received different answers from different sources - including from the IRS!). Assumed Situation: I am over 59.5 years of age. Last year I converted an IRA to a ROTH in the amount of $10,000. This year I want to remove $5,000 of that converted money. Are there any penalties or taxes that I would owe on that $5,000 withdrawl after being in the ROTH for just 1 year?

[@RetirementPlanningEducation]

No, there will be no tax or penalty for removing $5k of the $10k you converted last year. There will be no tax because you’re only removing some of the amount converted (on which you already paid tax when you converted it), and there will be no penalty because you’re over 59 1/2.

[@tomc9069]

@ Thank you! IDK why, but this specific answer is different in so many places. Thanks for your quick reply. 👍🏻😎

[@dalton7442]

You explain the distribution rules much simpler than my CFP study prep explains it, thanks!

[@aidenlong4952]

I have only perfect records on spreadsheets of contributions to a Roth IRA. These contributions were made 10 to 17 years ago that have been rolled into 3 different brokers. Brokers do not keep 5498 forms beyond 10 years. The IRS suggests keeping tax records for 7 years. How can contributions be removed without IRS proof of them?

[@RetirementPlanningEducation]

I don't know for how long the IRS keeps copies of all of the records they get (such as 5498s). Maybe they have them all? Regardless, the onus will ultimately be on you to provide whatever documentation you have of contributions, if you didn't keep the 5498s each year. That should be good enough. Again, unless the IRS can prove your records are wrong, I don't see them not allowing your own records

[@sakky29]

By far the best video on this topic, clearly explained, and help to "demystify" the topic. Keep up the good work!

[@RetirementPlanningEducation]

Thank you!

[@FlaschDJ]

Great. All the other videos were made by windbags or salespeople. Thx

[@lakshmi5538]

your videos are really great to understand for begginers too. If I withdraw for college tuition from Trad IRA, I would not incur penalty, is it subject to tax still?

[@RetirementPlanningEducation]

Thank you, I'm glad you like the videos! :-) Yes, unfortunately tax would still be owed on the traditional IRA distributions (assuming the money you're distributing is pre-tax and not after-tax "basis"). It's only the 10% penalty that would be waived; not the income tax...sorry!

[@EBMB21]

Is a QDRO conversion to a Roth IRA accnt taxable?

[@RetirementPlanningEducation]

If the QDRO is moving an existing Roth IRA from partner A over to partner B as part of the divorce, no, that's not taxable. But if it's a traditional IRA that partner A QDRO's over to partner B and partner B then converts that to a Roth IRA, yes, that will be taxable. The best way to think about it is that any time pre-tax money gets converted to Roth money, someone has to pay tax on it. It depends who's the one who owned the pre-tax money and converted it

[@EBMB21]

@ thanks. It makes sense the way you explained it.

[@angelaaaa224]

This was a great and informative video. just have a question and appreciate your response, I just opened my Roth IRA and contributed the full amount which was $6500 and already invested $3000 of that in funds so far. My question is that if I want to withdraw my contribution today, is it going to be the original $6500 before investing or just whatever cash is left after my investment? Like in this case only $3500?

[@RetirementPlanningEducation]

I'm glad you liked the video, thanks. You can take out up to the $6,500 at any time with no tax or penalty, as that's the amount of your cumulative contribution. Doesn't matter how that $6,500 is (or isn't) invested...it's just the total amount of contribution that matters, and can be taken out

[@angelaaaa224]

Thank you so much for the quick reply.

[@JAhnKor]

Thanks for the video, had a specific question regarding Roth 401k to Roth IRA rollovers: My Roth 401k consists of Contributions and Earnings. If I retired very early and rolled that Roth 401k into my Roth IRA, would the rolled over money still be considered Contributions and Earnings when it rolls over into the Roth IRA? If so, wouldn't that technically mean that I am able to withdraw contributions from my Roth 401k early without penalty, by first moving it over into a Roth IRA (where the rules allow me to withdraw Contributions at any time tax + penalty free)?

[@RetirementPlanningEducation]

Yes, your understanding is correct

[@bmp713]

Some articles say only the original Roth IRA account needs to have been 5 years old for earnings by a beneficiary to be tax free. But some say the new Inherited Roth IRA account to hold the money has to be 5 years old. The Roth IRA I inherited was more than 5 years old at time of passing but most of those years were with different brokerages. My brokerage managing it entered a "T" on my 1099-R saying it was because her account was only with them 3 years after having been transferred from another brokerage. Do I have to pay any taxes on earnings from the Inherited Roth IRA account holding the money or do I have to wait 5 years myself also? Why do you think the brokerage entered "T" instead of "Q"?

[@RetirementPlanningEducation]

They entered T because they aren't able to confirm she had a Roth IRA at least five years. They only know about the amount of time the account was with them. If it was less than 3 years, they'd have to use T, as they can't attest to any time held away at other firms.

[@bmp713]

@@RetirementPlanningEducation Thank you. Do I have to pay any taxes on earnings from the Inherited Roth IRA account holding the money or do I have to wait 5 years myself also? If its tax free how do I report my distribution as non-taxable using the T code?

[@bmp713]

@@RetirementPlanningEducation With the T code and given that the original owner held the Roth over 5 years, is it required to report an 8606 and do you have to calculate basis? Since I inherited the Roth what would I need to enter if reporting basis is required? The total value at time of death?

[@rohithnallam-fg4vz]

Hi Sir, I'm currently working in USA on a visa and would like to invest in Roth or Traditional IRA or a taxable account for retirement and growth purposes. I'm not sure how long I'm going to stay in the USA. My question is How to make a decision on which account to choose to invest in ETF's. 1. My understanding is if I invest in Traditional IRA, I'll save on taxes now 2.If I do investing in Roth IRA, I'll save taxes at the age of retirement I'm 32 now, If due to unseen situations If I have to leave to my home country at 39 and would like to withdraw money at my 40 what can be the best account to invest. Note: If I leave to my home country I fall under a lower tax bracket as I don't work for any employer in the USA and we don't have assets in USA to generate income. Thanks for read this.

[@RetirementPlanningEducation]

Sorry, but I have no knowledge of international tax or planning matters

[@rohithnallam-fg4vz]

Hi @@RetirementPlanningEducation , Thanks for reply. The 10% percent penalty on early withdrawal will be total amount invested or on the profits earned?

[@OddBall1958]

OK, Here is my scenario: I'm now 65, I started investing the full amount every year since 2010 ($7000.00 then $7500.00 now.). I've invested these contributions in to stocks that pay dividends. The dividends have been reinvesting back in to more stocks. The question I have is; Do I have to sell the stocks to take disbursements? or (my plan was) Can I stop the reinvestment programs, therefore creating a cash balance in my Roth and then take that cash as disbursements with out selling the stocks? There again creating an endless supply of cash or at least until they stop paying dividends. Thanks

[@RetirementPlanningEducation]

You can do either: reinvest dividends and sell off pieces of stock as cash is needed, or turn off dividend reinvest and take out the cash from the dividends

[@OddBall1958]

@@RetirementPlanningEducation Thanks, That's what I was told but wanted to make sure. Keep up the great work.

[@SivaBhargavRavella]

you are so awesome.

[@ramon5032]

Best video ever

[@RetirementPlanningEducation]

Thank you!

[@vandrex]

ROTH IRA - TRADITIONAL IRAs. Reflecting about my life and every time I remember that I'm 36 years old and my wife is 32 years with a combined net worth of $1.2M gives me great joy. No more 9-5, kids now a bit grown in school, no debts, it still seems like I'm a dream. So many years ago, it was tough and hard to manage the family with a lot of debts. Had to borrow from my friends and was insulted severely due to hardships. But now the grass is much greener on this side. I believe we achieved this through proper regular saving and key passive income methods.

[@sonlee8066]

Good one Van, Any investment tip for me? Would like to know how you came this far.

[@vandrex234]

​​@@sonlee8066 This was accomplished not by relying solely on $avings but other 0pportunities. In search of this, I found my current coach so many years back. His name is William Alex Jude. Even up till today. I'm glad to be working with him. No more debts or thought of going broke again for life. My advice for you is to get yourself a mentor too buddy.

[@sonlee8066]

​@@vandrex234 So Happy Thanks so much, I really do appreciate your comment. Can I connect with your inveztment advisor if you don't mind ?

[@vandrex234]

​​@@sonlee8066 Yes, Use his full name now to look him up on the internet and leave a message for him. His services are quite notable as he was recently featured on CNN. Rest assured he can work with anyone irrespective of your location.

[@sonlee8066]

​@@vandrex234 I'm talking with William Alex Jude right now. Thanks for the timely direction. I have had the intention of starting invezting. But I always thought it was late and I think I need to stop procrastinating. Thanks a lot. This was of so much help to me. I'll give it a try.

[@paulstanley1968]

The IRS does not agree with you at the 2:22 mark. I withdrew $5,000 of my contributions 4 1/2 years after I put it in. The IRS sent me a bill (CP2000). I went back and forth with them for 14 months until I gave up and sent them $1,388 in taxes and interest. The only other option they gave me was to prove my Roth IRA was over 5 years old. This is exactly how they would respond back to me every time, word for word. I'm looking at one of the letters right now. "One of the criteria for the IRA to be considered a qualified Roth IRA distribution is the Roth IRA must have been maintained for a minimum of 5 years."

[@RetirementPlanningEducation]

Hmm, very odd. I wonder if the custodian of your Roth IRA used an incorrect code on your 1099-R that year. So long as the aggregate amount of your withdrawals don't exceed the aggregate amount of your contributions, you don't need to worry about the five-year thing because you don't have to worry about whether or not the distribution is "qualified." It says right in IRS Publication 590-B "You don't include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth IRA(s)." You can always remove up to the amount of your contributions at any time. It's only when you start to take out more than that that you have to worry about whether or not it's qualified. Though I guess the path of least resistance may have been what you ultimately did...give up the fight at some point and just pay them. Did you make it clear to them that you weren't removing more than what you had thus far contributed???

[@paulstanley1968]

Yes I did, many times. My money is invested with Vanguard. I tried getting them involved but they were no help.

[@stevenobrien595]

Form 1099-R box 7 code J? Under 59 1/2 for distribution on contributions only. Just what I researched

[@kbgagt]

I agree with what Paul said. I pulled out contributions within the same year, and I was still taxed 10% penalty.

[@Pje3ski]

Very good video, helpful and informative. Thank you and good job sir!

[@ZachGinnOfficial]

Love Learning pal!!! Your a great teacher!

[@RetirementPlanningEducation]

Thanks Zach!

[@imagesinla8575]

I'm inheriting a Roth IRA. It looks like I can convert it to an Inherited Roth IRA, and let it continue to grow for 10 years before I have to empty the account. Will I be able to make new investments within the Roth, or will I have to leave it the way I got it?

[@fearnet2011]

The funds in my IRA account were paid in by my last employer. I've never paid a dollar of my own into my IRA. Was told i'd get penalized.

[@nareshvasani]

Very useful

[@RetirementPlanningEducation]

Thank you!

[@punnymoney3692]

I have a Roth IRA and its like 10 years old. I am only 37 years old. 75% of my money in there is from Capital gains. I would like to pull some of it for starting a new business. Is that possible?

[@RetirementPlanningEducation]

You can take out up to the amount of your total contributions without tax or penalty. For example, if you have $100k in there, $25k of which is contributions and $75k of which is gains, you can take out up to $25k without tax or penalty. Because the first $25k you take out will be treated as a removal of contributions. And since you had already paid tax on that money prior to putting it into the Roth IRA, the IRS doesn't tax or penalize you for taking it out. But if you take out more than $25k in this example, then you'll pay ordinary income tax AND 10% early withdrawal penalty on the excess. Like if you take out $30k: $25k will be tax and penalty-free. But $5k will be fully taxable, plus 10% penalty.

[@Jay-zw4co]

I opened a Roth IRA a couple weeks ago but I did not invest in any investments yet, am I able to transfer some of that contribution money to a regular brokerage account?

[@RetirementPlanningEducation]

Yes - you're always able to take out up to the amount of your contributions with no tax or penalty. So long as you take out less than you put in, there are no tax implications (but you will receive a 1099-R for this year showing the distribution, which will need to be reported on your tax return, albeit not taxable).

[@Jay-zw4co]

@@RetirementPlanningEducation well on Fidelity's website it's not allowing me to transfer from my Roth to my individual brokerage account, it is saying I have no cash available to withdraw.

[@RetirementPlanningEducation]

@@Jay-zw4co Hmm, that's something you'll have to figure out with Fidelity. If you deposited money into your Roth IRA and haven't yet invested it, you'd have to find out from Fidelity why they aren't showing you as having any cash balance that's able to be withdrawn or transferred.

[@Jay-zw4co]

@@RetirementPlanningEducation will do thank you for the quick response.

[@exaucemayunga22]

QUESTION: I opened a Roth IRA with Fidelity in 2020, contributed $5,000 and gained $1,000. Will I be penalised if I wanted to take out the $5,000 that I contributed because it has beenless than 5 years?

[@RetirementPlanningEducation]

No. If you’ve not yet taken any money out of any Roth IRA, you can take out up to the amount of your cumulative contributions at any time with no tax or penalty.

[@exaucemayunga22]

@@RetirementPlanningEducation Thanks for the quick reply. Keep up the good work👍🏾

[@sam10818]

My parents don't have any income but they are my dependents. Can they open Roth IRA and I put maximum money in their Roth IRA accounts in addition to maximize my Roth account? Or they have to have income to contribute to Roth IRA?

[@RetirementPlanningEducation]

They need to have their own earned income from wages or self-employment to be able to have Roth IRA or traditional IRA contributions done in their names.

[@sam10818]

@@RetirementPlanningEducation thanks for your response. Appreciate that! Can they still open the Roth IRA account and not contribute into it and keep it at $0 balance until they make any income?

[@RetirementPlanningEducation]

@@sam10818 Most likely yes; I believe most custodians will allow an account to be opened but not funded. However, there isn't any real benefit to doing that. And if the account sits empty for a while, the custodian may automatically close it anyway. For example, some custodians will do a purge once a year or so of accounts that haven't had any balances or activity for a year or two.

[@sam10818]

@@RetirementPlanningEducation thanks for your answer. I subscribed

[@dylansperstad548]

So I am 30 years old my grandmother has been putting money into this an account my whole life I am up to about 60,000 I am on my own with a newborn and I have a full-time job my wife has a full job but we still live in a horrid horrid apartment where tweakers just shoot up on the front steps it just happened this morning I need to get out but I can't save enough money to make the first last and the deposit to get into a new place I really need to be able to take this money out and I don't know how exactly to go about doing that should I just get with a financial advisor or is there an easier way to withdraw this funds in a desperate state right now times are tough any info would be appreciated aside from

[@dylansperstad548]

And honestly a lot of what he says is going over my head I'm not educated in this kind of finances at all I've never had any classes never went to college for it

[@RetirementPlanningEducation]

Hi Dylan. If you're the owner of the Roth IRA, you can always take out up to the amount of the contributions your grandmother put into it for you. The amount of those contributions can come out tax and penalty-free. For example, of the $60k of current value, if $40k of it was your grandmother's contributions, you can take up up to $40k without any tax or penalty. If you take out more than that, then there will be tax AND a 10% penalty on the amount you take out beyond $40k in this example. But if you're using the money to buy a house, you can take out up to $10k above and beyond that $40k and NOT have to pay the 10% penalty on that extra 10% (but you'll still have to pay tax on it). As far as how to actually take money out of the account, reach out to the custodian of the account (e.g. Vanguard? Fidelity? Scwhab? eTrade?) and ask them how. They'll tell you.

[@kraw7272]

Nice and simple. Thanks much.

[@611eritravin]

I want to withdrawal contributions from my Roth IRA account. I only contribute about $1200 per year but I need to withdraw at least $7000. Am I only allowed to withdraw the contribution amount within my current year or can I withdrawal contributions from previous years without being penalized or taxed? This is a small Roth Ira account that I’ve had for years and I withdraw $9000 from the account several years ago but returned the funds back into the Roth IRA account before 60 days. I can’t remember if it was a contribution withdrawal only or was it some of the earnings but I did not use the money and returned it back to the account. I have a couple of credit cards I would like to use this money for to pay off.

[@RetirementPlanningEducation]

You can withdraw up to the amount of your cumulative contributions without tax or penalty. For example, if you've contributed $10k in total over your lifetime and have never taken any out (other than than 60-day rollover you did which, if properly processed as a 60-day indirect rollover wouldn't have counted as a distribution), you'd be able to take out up to $10k at any time with no tax or penalty.

[@611eritravin]

@@RetirementPlanningEducation Thank you so much for your response.

[@rockygeurkink8995]

This is the most detailed, and clearly explained video on Roth IRA withdraws.

[@RetirementPlanningEducation]

Thank you Rocky!

[@nxet2669]

What if I lose not gain some of my original contributions can I take my remaining contributions?

[@RetirementPlanningEducation]

If you contributed $30k in total and the the account value is now $25k because there have since been losses in the account, you would be able to take out the full $25k with no tax or penalty because it’s no more than your initial contributions

[@nxet2669]

@@RetirementPlanningEducation the n you very much

[@johnhernandez190]

How do I get access to the ira account do I need to call someone or go two a website need help take out money

[@RetirementPlanningEducation]

Contact the custodian of the account and ask them. But generally the easiest way is to fill out a form to connect your bank account to the IRA so you can then do electronic ACH transfers between the two.

[@johnhernandez190]

Ok thinks for the tip and one more question will it help if I have power of attorney to? & what was the paper called that I need to ask my bank to fill out

[@RetirementPlanningEducation]

@@johnhernandez190 sorry, but I’m not following. I’m not sure why you’d need a PoA for your own account. Or do you mean mean it’s an inherited account? Either way, it would be best to contact the custodian and have them walk you through whatever you’re looking to do.

[@johnhernandez190]

It’s not my account help out my dad to take out money from it how can I put this he is in jail that why I was ask lot of questions

[@RetirementPlanningEducation]

@@johnhernandez190 Got it, thanks. Definitely ask the custodian; they should be able to answer this for you.

[@jadenqiu4376]

If under 591/2, but have IRA account more than 5 years, is there a 10% penalty for gain withdraw?

[@RetirementPlanningEducation]

Yes, there would be tax AND penalty on the earnings in this case.

[@PJBrunet]

@@RetirementPlanningEducation What if you qualify for an exception, but the broker automatically takes out the 10% penalty? Do you fight with the broker or is there some kind of form to file?

[@nrv2032]

If I contribute 5k last year but have no gains but want to withdraw my contributions can I take out the money at loss assuming 5k is now 4K ..can I withdraw the 4k

[@RetirementPlanningEducation]

Was that the only money in there, or were there prior contributions or conversions? If it’s the only money, yes, it can all come out. And if you have other money in there, you can out $5k. All said and done, you can take out in aggregate up to the amount of your cumulative contributions without tax or penalty.

[@nrv2032]

@@RetirementPlanningEducation Thank you

[@drip6337]

If you take out $20,000 of contributions can you later start to contribute back into the roth ira?

[@wendellotanael5201]

Subscribed!!

[@RetirementPlanningEducation]

Thank you; I appreciate it!

[@ojoj8249]

I was making contributions from my bank account to my Roth IRA and my Roth IRA hasn’t been open for 5yrs and I’m not 591/2 do I have to pay taxes or a penalty fee if I withdraw my contributions?

[@RetirementPlanningEducation]

No, you're allowed to withdraw up to the amount of your contributions at any time for any reason, with no tax or penalties

[@GEO-xx6sq]

I'm 56 years old and opened a roth IRA in 2021. ( not a rollover ) I contributed a total of 6950.00 for a few months but made no gains. I withdrew all of it in the same year. Did i mess up?

[@RetirementPlanningEducation]

So long as the amount you took out was no more than $6,950, there is no tax or penalty on the withdrawal.

[@foxyepoxy602]

That was a great video! Very thorough, clear, and to the point. Thank you so much for the information it was exactly what I was looking for.

[@ianstanley5826]

I’m 19 and just inherited a Roth ira but I would like to buy a car how would I withdraw from my fidelity Roth ira rda account

[@RetirementPlanningEducation]

Call up Fidelity and ask them what the process is to get money out. They will be able to mail you a check or you can connect a bank account to it and electronically transfer money out to you bank.

[@ianstanley5826]

@@RetirementPlanningEducation thank you man

[@ecobuis]

Great Job and nicely done. You have made a complicated subject so easily understandable. Thank you.

[@RetirementPlanningEducation]

Thank you!

[@ckookiemonster]

What if I contributed $10K in two years. Then took $2K in realized loses. Then my $8K gained $2K and now back even. Will my contributions still be $10K or only $8000?

[@RetirementPlanningEducation]

Losses (or gains) don't matter in this case. The first $10k you take out will all be assumed to be a return of your original contributions. So, if you take out $2k, you have $8k of contribution remaining (even if there are a few thousand of gains that occur). So then you'd still be able to take out another $8k as a return of contribution. After you've taken out $10k in total, any other distributions will be assumed to be from gains

[@ckookiemonster]

@@RetirementPlanningEducation Thank you very much!

[@wannaknow4184]

Right to the point. No Fluff, No Fillers. Best Roth Ira Info Video I've seen yet. Thanks.

[@RetirementPlanningEducation]

thanks!

[@sam10818]

@@RetirementPlanningEducation My parents don't have any income but they are my dependents. Can they open Roth IRA and I put maximum money in their Roth IRA accounts in addition to maximize my Roth account? Or they have to have income to contribute to Roth IRA?

[@vaneenusa1776]

Yes, excellent thorough explanation!

[@ralphz3849]

Thanks for the info. The 59 1/2 age limit comes up a lot in this discussion which confuses things a bit. However, what happens to the order of withdrawal for activities AFTER age 59 1/2 which is the case for most retirees. For example: Assume the individual is already 59 1/2, and has a five year old Roth IRA with $5k and performs the actions below. Is the order of withdrawal is still the same? What is taxable?: 1) He makes a 401k conversion into a Roth IRA of $10K. 2) He pays taxes on the $10K 401k conversion out of pocket. Now he has $15K in the Roth IRA. 3) He puts the $15K of the Roth IRA in a fund with 10% return. At the end of the year he has a $1500 gain. 4) Considering part of the gain came from $10k he converted to the account, can he withdraw the $1500 gain? Or does five year apply to $10k portion converted? 5) Do taxes/penalties apply to any portion of the withdrawal?

[@RetirementPlanningEducation]

Since he’s over 59 1/2 and his first Roth IRA is already over five years old, the ordering doesn’t matter at this point. All distributions will be “qualified,” which means tax and penalty-free.

[@ralphz3849]

@@RetirementPlanningEducation Thanks for the quick response. As a suggestion maybe these Roth IRA rules should be divided into two parts or videos. 1) Rules for Roth IRAs before 59 1/2 and 2) Roth Rules rules after 59/1/2. Regardless, you have been very helpful. Thank you for taking the time to provide this information.

[@WebbyWunda]

Very clear information, thank you, and I have subscribed yo your channel! My apologies for asking but... In early April 2020 I yanked out $7000 from my Roth IRA (foolishly thinking I had contributed twice, but I actually hadn't)... The Roth IRA was more than five years old and had more than 50K in contributions saved from already taxed income. I hope I'm correct in thinking that no taxes or penalties would be due on that $7000 withdrawal - even though I was only 58 in 2020 - right? My IRA provider issued a 1099R for 2020 which shows a 'distribution' of $7000 occurred, with a code of 'T'. Is that correct? My next mistake - Unfortunately that 1099R form was accidentally missed out of our joint tax calculations and submission for 2020 (which was mailed in last month. (Here in Texas we had a June 15th, 2021 filing deadline) ... Do we need to submit some kind of an amendment for 2020? Does this accidental omission trigger any kind of penalties or taxes on the $7000 contribution withdrawal? Any advice is much appreciated.

[@RetirementPlanningEducation]

Hi, thanks for subscribing! Based on what you said, it's correct that the $7k wouldn't be taxable (because it's just a return of some of your initial contributions). And the "T" code sounds right; that means it's a distribution where and exception applies. I don't believe you need to amend your filing since there will ultimately not be any change in your final tax amount for the year. The only change would be on Form 8606, which is what is used to track your cumulative basis (i.e. contributions) in your Roth IRAs. But in your scenario, I think 8606 isn't required to be included with your return. It would be required if some of your $7k distribution was taxable or subject to the 10% penalty. I don't think the IRS would come back and ask you to change anything. Because even if you included the distribution on your Form 8606, your final tax liability wouldn't change at all. If, for whatever reason, they do eventually ask you to amend your return, do it at the time. But even then, I don't know what fee or penalty they'd try to assess since a) you DID already file a return on time and b) the amendment wouldn't result in any additional taxes owed.

[@WebbyWunda]

@@RetirementPlanningEducation Thanks, for that detailed reply, Andy. Much appreciated. I'll watch more of your videos so I'll hopefully not be such a dimwit in the future!

[@vevenaneathna]

man... retirement accounts are so incredibly useful in ways that +95% of Americans have no idea about. I used to make about 150k/yr and am going back to medical school right now. 1. I was able to avoid (not evade lol) paying a bunch of income tax by funding the crap out of my IRA, and now I take out ~the standard deduction + education credit, every year from my IRA, tax and penalty free, coz my qualified education expenses are like 70k per year lol 2. I was able to pile about 3 years worth of contributions into my Roth IRA (~20k$), which effectively made the money disappear from the pile of cash the school/gov can see with the FASFA, which reduced my expected finical contribution. My school only looks at the first year's EFC and determines fin aid stuff for the next 4 years so I could just take the money back out when needed as it was always after tax 3. Because I am trying to avoid taxes, I can continue to day trade in my Roth IRA, and not have to claim any gains at the end of the year... instead I can basically pick and choose which year over the next 10 years which I will be making close to nothing, I want to pay the tax bill. Now obviously brokerage accts are a lot better coz of long term capital gains if I ever make a bunch of money.... but ide rather spread it out over 10 years as I see fit, than to play the brokerage game. I also can control my net income and make sure I am eligible for state funded health insurance or other financial assistance like food stamps/internet I think. I am morally opposed to this though. Who ever said they have to be used for retirement investing? lol... I feel like theses are all secret super powers for "retirement" accounts that no one told me about and I had to scheme and read the gov tax website to figure out. Most recently I took out an extra 20k in student loans @ 5.5% and am going to buy I bonds with them. Student loan interest is still frozen and inflation is effectively erasing ~30k of my 280k debt every year right now lol. Might as well take out loans before the MD plus loan rates go up to 8-9% in a couple years... thanks for the very thorough video

[@bittersweetsmith6062]

This is the professional advice we need! So clear and effective! Thank you very much!

[@RetirementPlanningEducation]

Thank you!

[@PJBrunet]

If I pull out a contribution, but the broker taxes it anyway, how do I request a refund for the tax?

[@RetirementPlanningEducation]

You can ultimately clean it up when doing your tax return. Any tax you paid but shouldn't have will be refunded as part of your return

[@johnfindlay8636]

Good video. Here’s one that most financial folk on KZbin may not understand. I open a Roth IRA in 2015. In 2020, I turn 60 and I do a Roth IRA conversion. In 2021, I withdraw everything. Most videos I’ve seen say that tax is due on the gains related to the conversion. I think there is no tax due since I meet the age test and the account age test. The conversion 5 year rule only applies to the conversion amount not the gains on the conversion amount. What do you think?

[@RetirementPlanningEducation]

If your first Roth IRA was opened and funded at some point in 2015, you will have met the five-year account aging test on December 31 2019. And then if you're also over 59 1/2, you met the other part of what makes Roth withdrawals "qualified." And then once you hit that point where all withdrawals are qualified, there are no taxes or penalties on any withdrawal after that, regardless how or when the money got into the account. So, in the example where the Roth IRA was opened and funded more than five years ago AND the account holder is over 59 1/2, 100% of the Roth IRA can be withdrawn without any tax or penalty (even if a conversion was just done yesterday)

[@Green-jl9yh]

Hi Andy how are you Hope you’re doing well 2018- open Roth IRA and converted from traditional Ira 2019- converted another traditional Ira 2023- withdraw large amount from Roth ira I’m 74 years old Will I be paying tax on Gain ? Looking forward your answer Thank you sooo much

[@RetirementPlanningEducation]

Hi. Since your first Roth IRA was opened/funded at least five years ago (i.e. 2018) AND you're at least 59 1/2, EVERY dollar you take out of any Roth IRA at this point and forward will be a "qualified" distribution, which means none of it is taxable or subject to penalty.

[@Green-jl9yh]

You’re just unbelievable I can not thank you enough Again thank you sooo much

[@MayaKanaKa]

In March 2020, I contributed $6k in Roth IRA for 2019. In April 2020, I contributed $4K for 2020. If I withdraw $6K, will that be deducted from my contribution for 2019? Or they will take out $4K from 2020 contribution and $2K from 2019 contribution? Will I have to pay taxes?

[@RetirementPlanningEducation]

It doesn't matter what years you contributed...all of your contributions are lumped together into one single amount within the Roth IRA. In this case, the account has $10k of contributions. The fact that some was for 2019 and some was for 2020 doesn't matter. Whenever you take money out of a Roth IRA, it's assumed you first take out from money that was contributed (as opposed to taking out money that was earnings/growth on your contributions). And there are no taxes or penalties for taking out your contributions. Based on what you summarized here, you'd be able to take out $6k with no tax or penalty. And again, there is no distinction or significance of what year's contribution you're taking out. In the year you take money out of a Roth, you'll have to fill out a Form 8606 with your tax return. You'll see in there it doesn't make any mention of what year(s) you put money into it.

[@MayaKanaKa]

Retirement Planning Demystified Thank you so much for the clarification.

[@stevenobrien595]

@@RetirementPlanningEducation Concise explanation.👍

[@MaureenKingTAPPING]

My hubby and I are both over 65 and retired. If we roll over/convert a traditional IRA into a self-directed ROTH IRA (iTrust Capital?) we understand that we will pay income tax on the converted amount. Will our adult children be able to inherit our new ROTH IRA tax free? Will they have to take full distribution within 10 years of our death because of the Secure Act?

[@RetirementPlanningEducation]

Do either of you already have a Roth IRA opened and funded? And if so, when was it first funded? If you do not yet have any Roth IRAs, your kids will be able to take out any amounts converted without tax or penalty. But they will have to wait until your first Roth IRA was funded five years before they'll be able to take out any gains. In other words, if you die within five years of opening your first Roth IRA, your kids won't be able to take out gains without paying tax on it until that five year period is completed. But they will be able to take out amounts converted at any time. And yes, under current legislation, they will need to empty the accounts within 10 years after you're gone

[@Thankful305]

Forgive me if you have previously covered this subject: IF I obtain a Roth IRA from ex husband, through a QDRO, and I am 61 years old. Can I withdraw part of it to pay off my home? Or must I wait 5 years. Also, I do not have income, except for alimony. I am seriously confused, with all of these penalties and tax laws. Perhaps you have a recent video, that has all of the ins and outs; regarding this issue.

[@RetirementPlanningEducation]

Hi. Good question and I'm not entirely sure as I haven't directly come across that before. But I'm confident in saying you should be able to take out "basis" from the account without any tax or penalty. In other words, you can take out as much as your ex put in and won't have to pay any tax or penalty on that amount. Like if he put in $50,000 and it has since grown to $60,000, you'd be able to take out the $50,000 with no problems. It's the other $10,000 that I'm not sure on. Worst case, you'll have to pay tax on the $10,000 if you don't hold the account for at least five years before taking it out. I'm not a divorce expert, but if I had to guess, I would think that five year rule may be met if your ex had already had the account for five years. Separately, since you're over 59 1/2, there will be no 10% penalty on anything. At most, you'd maybe have to pay tax just on the gains in the account.

[@mohindersingh3512]

Excellent!

[@RetirementPlanningEducation]

Many thanks!

[@dosrios57]

Hi, I am reinvesting my Div's now in my ROTH and when it matures, I wish to have them placed in my Money market so I can transfer them to another Institution. Can I do this or do I have to sell stock to get a Distribution?? Thanks

[@RetirementPlanningEducation]

Yes, you can have dividends set to NOT reinvest such that they will pay as cash and sit in your Roth IRA as cash. You can then distribute out that cash to a money market (or bank account or brokerage account, etc.) Just be aware of the withdrawal rules around Roth IRAs so you're aware of whether or not the distribution is taxable or penalized.

[@mrlover2891684]

Very clear and informative. Thank you!!!!

[@julietasevilla7110]

So the money that I put in from my paycheck that’s been already taxed by my employer, I DONT have to pay taxes on my Roth then correct?

[@RetirementPlanningEducation]

Any money contributed to a Roth account (whether a Roth IRA or Roth 401(k), etc.) has already been taxed. As such, it's correct that those contributed monies aren't taxed again when withdrawn.

[@xclservices]

Thank you for such a good explanation.

[@Mikesadventures-m2q]

If you change brokers for your roth does the clock start over?

[@RetirementPlanningEducation]

Thankfully no...it's based on when you opened and funded your first Roth IRA. Doesn't matter how many times you roll that account to different brokers, or how many additional Roth IRAs you may open...they all are keyed off the year you opened and funded the first one

[@melindahernandez8778]

Thank you for your video. I was wondering if you can give me a "pointer". My financial advisor opened a Roth for me , which I have contributed( max. Of 7, 000) to for the last two years. The problem is , when I went to add another 7 to it this year he had a rude awakening. He opened that Roth with my unearned income( settlement from an injury ). He has no clue how to get that money out without me being taxed! Any pointers you can offer would be greatly appreciated, PLEASE. Thank you.

[@RetirementPlanningEducation]

Ugh. So you haven't had any earned income in the last few years? Are you married and, if so, did your spouse have earned income??? What year did you make the first contribution?

[@melindahernandez8778]

@Retirement Planning Demystified Hello, thank you for replying. I have a lung condition in which I was able to get perm/partial disability income bi-weekly. I'm not married, was not blessed with children. I opened the Roth in 2020.

[@RetirementPlanningEducation]

@@melindahernandez8778 If you didn't have any wage or self-employment income over the last few years, you'll have to take out the contributions you made in 2020 and 2021. For 2020, you'll have to file an amended tax return to add in a 6% penalty on the "excess contribution" to your Roth IRA. As for 2021, assuming you haven't filed your tax return yet, you can still take out the contribution you made for 2021 and avoid the 6% penalty on that one.

[@ben159xbox]

I have 4500 in credit card debit and want to withdrawal frown my Roth IRA. What kind of penalties am I looking at? What percentage should I pay to avoid my taxes being affected?

[@gabbyreg7628]

Oof same. How did you do?! What did you do??

[@Lou9chess]

Andy...If I open my first Roth IRA at retirement at age 72 and do taxable conversions from my 401K am I subjected to the 5 year rule if I wish to withdraw taxable conversion money and / or gains a year or two later? Thanks

[@RetirementPlanningEducation]

Yes, you’ll have to wait five years to take out the gains (without tax) on the amount converted. But the amount converted can come out whenever with no tax or penalty.

[@hudsonsherrod777]

When it comes to contribution withdrawal rules, is the Roth IRA portfolio treated as one unit or is it divided by the different investments inside the Roth? For example, consider that I opened a Roth IRA and invest $10 in Investment A and $10 in Investment B. If Investment A losses 50% (now worth $5) and Investment B gains 50% (now worth $15) my entire portfolio is still at $20. But if I were to withdraw my initial contribution of $20 at this point, would the $5 gain in Investment B now be taxable even though I did not withdraw more than my initial contribution amount? Any help would be appreciated!

[@RetirementPlanningEducation]

All of your Roth IRAs are treated as one. In this example, it sounds like you contributed $20 in total to your Roth IRA(s). As such, you'd be able to distribute up to $20 at any point in your life (even if you're not yet 59 1/2 and haven't yet had your Roth IRA(s) for at least five years) without tax or penalty, as you'd simply be taking out your contributions.

[@guiltyred6144]

Thanks so much for this info. I recently started looking at my roth ira account info and I came across the Federal income Tax Withholding option. Is there any reason why it's set, by default, at 10% federal tax withholding? Assuming I do make a qualified distribution that's both tax and penalty free once I retire, do I still need to withhold 10% for federal income tax? Or should I change that? Thanks in advance for your help.

[@RetirementPlanningEducation]

I'm not sure why the distribution tax withholding is set to 10% federal for your Roth IRA. Assuming the Roth distribution will in fact be qualified and therefore not subject to tax or penalty, no, you don't need to have tax withheld from it. However, tax withholdings are fungible across your various income sources. For example, assume you get Social Security, a pension and make a traditional taxable IRA withdrawal and for whatever reason don't withhold enough against those things. In that case you can use withholdings from your Roth IRA to cover the tax obligation on those other things. But ideally, it's cleaner to just withhold taxes from the income that's actually taxable. Which would mean having some taxes withheld from your Social Security, pension and/or IRA distribution.

[@guiltyred6144]

@@RetirementPlanningEducation Thanks for the super quick reply! And yea it was kinda weird, had I nkt checked it honestly it could've been set up that way for the next few decades honestly. But I was unaware I could potentially use the withholdings from it to offset those other future income sources like social and my 401k. Hopefully my brain remembers that when I do retire lol. (and hopefully the govt won't change it for the worse) Thanks again!

[@joseroa9645]

THANKS FOR EXPLAINETION, I have question, if I rollover my 401K in to ROTH IRA till I have 5 years hold.

[@RobRocha]

how do you report withdrawing my original contributions? the tax programs are saying I need to pay taxes on them?

[@RetirementPlanningEducation]

It should ask you somewhere what your total contributions were to your Roth IRAs. And it should also ask what your previous distributions, if any, were. If you’re not taking out more than what you paid in, it’s not taxable. It may take some digging and reaching out to the support team to figure out how to properly enter it all in the software.

[@THECURELOST13]

if i am only 49 and if i were to pull out all my 'contributions' from my roth just to put that money into a regular 'brokerage account' that i know i will have to pay taxes on.... will it be better or 'a wash' or worse than just taking money out early directly from the (10+ y/o) roth?

[@RetirementPlanningEducation]

Impossible to say. I suppose it depends on how you invest it outside of the Roth. But all else equal, I would assume it would be better to leave the gains in the Roth since those distributions will eventually be tax-free. Versus if you pulled them out now, you're having to pay income tax plus an extra 10% on it. And then when you reinvest the proceeds in a normal brokerage account, you'll eventually have to pay tax on gains taken out. So, by leaving it in a Roth and waiting until you're 59 1/2, you'd skip all of the taxes and penalties. But that aside, is life circumstances are such that you need this money today (for whatever reason), then maybe that's your only option. All said and done, the answer is "it depends" and will be based on your specific facts and circumstances. But generally speaking, if the money is already in a Roth, it's likely best to leave it (if you can) so it's all eventually tax and penalty-free NOTE - this is not specific advice. You have to make the decision that's best for you and your circumstances, which I know nothing about.

[@ChicanoPridex08]

I contributed 4500 in my charles schwab personal roth ira. It grew to 5000. I recently sold my 4500$ worth of shares of the invest I chose in mg roth and now the order status notes that "early with penalty". What did I do wrong?

[@RetirementPlanningEducation]

When you say "order status," do you mean you distributed $4,500 out of your Roth IRA and you got a 1099-R in January showing the $4,500 distribution? Assuming so, what code is in box 7 of the 1099-R?

[@hobbyfarmer1452]

If I am over 59.5 yrs old, and convert a certain amount from Ira to Roth ira, can I use that money next year w/o penalty?

[@RetirementPlanningEducation]

Yes, if you're over 59 1/2, you can take out the amounts converted (but not necessarily gains on the amounts converted) at any time without tax or penalty.

[@StockSpotlightPodcast]

Another great video!

[@RetirementPlanningEducation]

thanks!

[@jarduuu5572]

Great video!! I just have one more question. If I have a roth 401k through work and a roth ira on the side. Can I only contribute 6k between the both. Or 6k into both?

[@RetirementPlanningEducation]

The contribution limits for your Roth 401(k) and Roth IRA are exclusive of each other. You can potentially contribute up to $19,500 (or $26,000 if you're 50 or older) for 2021 into your Roth 401(k), assuming the amount of your contribution doesn't excess your earnings. Separately, you can potentially contribute up to $6,000 (or $7,000 if you're 50 or older) for 2021 into your Roth IRA, assuming the amount of your contribution doesn't exceed your earnings AND assuming your Modified Adjusted Gross Income isn't high enough to phase you out from being able to contribute.

[@lettypsolis7943]

Thanks Andy for this very informative video! I am currently leveraging the down market and doing more Roth Conversions, and this video answers my questions on the taxability of my withdrawals in the future.

[@FlaschDJ]

Two questions: I opened a Roth IRA in 2020 (age 67). I contributed $5. Now I intend to do a conversion of 10k from a traditional IRA to this Roth. When can I withdraw that 10k to avoid all penalties? When can I withdraw the GAINS on that 10k to avoid all penalties?

[@RetirementPlanningEducation]

The $5 of initial contribution and the $10,000 of conversion can be removed at any time. Any amounts above and beyond $10,005 removed prior to January 1 2025 will be taxed. Once you hit January 1 2025, ALL future removals will be completely tax and penalty-free

[@FlaschDJ]

Thank you. I am still not clear. Let me revise my question: - I opened the Roth in 2020 (age 67) with $5. - In 2021, I did a conversion of $10k (from a Traditional IRA). - In 2022, I did another conversions of 15k. - Let’s assume that NONE of my Roth had ANY gains, ever! Having no gains, will I be able to withdraw any amounts, at any time, penalty free? Or must I still endure waiting period(s)?

[@RetirementPlanningEducation]

@@FlaschDJ No waiting periods in this case. Since you're over 59 1/2, there is no special waiting period around taking out amounts that were converted (and there is never a waiting period around taking out contributions). The only waiting period you have is around being able to take out gains; that's not until January 1 2025

[@wendellotanael5201]

Hi Andy I have a question. I have self-directed checking accounts One for Roth and one for Traditional. All the money are in different brokerages that can hold institutional/custodial my contributions. My question is what is considered a withdrawal. Is it when you pull the money out of the brokerages To the self directed checking account or when you take the money out Of the checking acoount? It’s a solo 401k.

[@RetirementPlanningEducation]

Sorry, but I'm not familiar with the arrangement you're referring to with regards to a self-directed checking account attached to your Roth IRA and traditional IRA. As such, I'm not sure when the distribution would technically occur. Perhaps ask the question to the custodian of the accounts and ask them. Specifically, when would they issue a 1099-R for the year to show a distribution; when the money leaves the Roth IRA/traditional IRA, or when it leaves the attached self-directed checking account?

[@drott150]

I could have swore I've heard from multiple reputable sources that the 5 year rule is rigidly applied to all conversions even if you are over 59-1/2? For instance, if I'm 58 and convert $10K from my trad IRA in 2021 (and pay all taxes due at that time), I was under the impression I could NOT touch that money without a 10% penalty until Jan 1, 2026 - even though I became 59-1/2 in 2022. You are saying nope, that's not true and that I can withdraw the entire amount whenever I want without penalty as soon as I hit 59-1/2???

[@RetirementPlanningEducation]

Correct. The reason for the five-year rule on conversions is to prevent people from otherwise completely skirting around the 10% early withdrawal penalty from taking money out of tax-deferred accounts. For example, if you're 50 and want to take money out of your traditional IRA, you'd have to pay tax on it AND a 10% early withdrawal penalty. But if you instead converted it, without a five-year rule on it, you'd pay tax upon the conversion and then would be able to take it out without the 10% penalty. To prevent that, the IRS puts a 5-year window around taking out conversions without the 10% penalty. BUT, once you're 59 1/2, you wouldn't have the 10% early withdrawal penalty on distributions from your traditional tax-deferred accounts anyway. So the IRS similarly drops the 10% penalty if you take out converted monies at that point...even if it is within five years of the conversion

[@drott150]

@@RetirementPlanningEducation Cool beans, thank you! So if I'm getting the ins and outs, the only example where the 5 year rule would preclude someone older than 59.5 from withdrawing money without penalty or taxes would be if their first Roth account (and initial contribution) was opened less than 5 years ago. For instance, if a 58 year old opened a Roth for the first time and made a contribution that year, that person would not be eligible to withdraw without 10% penalty (and taxes?) until they were 63. But if someone opened a Roth at age 53 and then rolled over a certain amount into the Roth (and paid taxes at that time) at age 58, then they could pull all the money out tax and penalty free starting at 59.5? Is that correct?

[@RetirementPlanningEducation]

@@drott150 Sort of correct. In the first example where the first Roth was opened and funded at age 58, yes, the person would need to wait the full five years before being able to take out any gains tax-free. But once the person hits 59 1/2, the 10% penalty goes away. So, in that case, after 59 1/2, you'd be able to take out gains without the 10% penalty, but you'd still have to pay tax until the account is a full five years old (starting Jan 1 of the year the account was opened and funded)

[@s.k.7633]

@@RetirementPlanningEducation Thank you for a great video and elaborating on Joe's question, which I was also puzzled as I read the IRS definition for IRA distribution code Q; which says a qualified Roth (w.r.t. conversion) distribution must satisfy both 5 year window and 59 1/2 age requirements. If I follow your explanation correctly, in a situation where I am past 59 1/2, have been doing roth conversion since 2017 every year. If take a roth distribution this year covering my direction roth contribution, the conversion amounts for year 2017-2021. Come next year the 1099 Rs I will be getting will consist of some with distribution code Q (e.g. 2017 conversion ) and code T's ( e.g. 2018 conversion), is that right?

[@RetirementPlanningEducation]

@@s.k.7633 Has the Roth IRA been with the same custodian since 2017? If so, I would think they would code ALL Roth distributions as "Q" because 1) they know the Roth IRA has been opened at least five years (which starts January 1 of 2017; the year you started doing conversions) and 2) you're over 59 1/2. As such, you meet the conditions for ALL Roth distributions to be qualified at this point; it doesn't matter how the money got into the account at this point. In other words, whether it was a contribution, conversion or earnings, it doesn't matter...everything you take out is now "qualified"

[@adnan2911]

Hello Thanks for the great video.. QQ if i am under 59 1/2 and i am meeting 5 year rule and i take earning money out for qualified education.. I know i wont be paying penalty but what about tax on earnings?

[@RetirementPlanningEducation]

I'm glad you liked the video, thanks. If you take out more than the amount of your contributions, yes, you can get an exception to the 10% penalty if you're taking out earnings to pay for qualified education expenses. But you unfortunately can't escape paying tax on those earnings :( At least not until you're 59 1/2.

[@adnan2911]

@@RetirementPlanningEducation Really appreciate your quick response .. I was confused between roth ira and 529 plan, So I guess 529 plan is better choice for college expenses since earnings are tax free if used for college tuition at any age right?

[@RetirementPlanningEducation]

@@adnan2911 Yes, if you know you'll actually use the money on qualifying education expenses, a 529 would generally be better because earnings come out tax and penalty-free, regardless of age, so long as they're used for qualifying expenses. But some people actually end up overfunding 529s. Whether it's because the kid goes to a cheaper school than planned, or doesn't go to school at all, for example. As such, then you have a 529 where the earnings will be taxed and penalized if used for anything other than qualifying education expenses. You can transfer the money to other beneficiaries (including yourself), so hopefully someone can use it up on education. But if not, tax and penalty will apply on earnings. Whereas with a Roth IRA, all of the money will eventually be free from tax and penalty regardless of the reason you use it (such as in retirement). So it's unfortunately not a black-and-white answer as to which one is definitely better for saving for college. Generally speaking, a 529 is likely better, just don't overfund it to the extent you can avoid it.

[@adnan2911]

@@RetirementPlanningEducation Understood 100% :).. Thanks alot.. Wish you lot of success with this very educative youtube channel

[@allyndhynes6852]

What do I tell my financial advisor if I want to use Roth funds to help in the purchase of a home?

[@RetirementPlanningEducation]

Ask for their opinion about it. He or she should be fully aware of the ability to 1) remove your Roth IRA contributions without any tax or penalty and 2) remove up to $10k of gains without penalty (but with tax) to buy, build or remodel your first home. And then discuss with him or her the pros and cons of doing it and how it all fits into your broader goals and plans. It's isn't necessarily good or bad to tap a Roth to help pay for a home. It really all depends on your goals and priorities and financial circumstances. Your advisor should be able to walk you through all of this.

[@madworldusa255]

This advice is not accurate. Does not reflect US Tax Code and US Law.

[@RetirementPlanningEducation]

Thanks for the feedback. What in particular did you notice is incorrect?

[@shacharcohen8664]

What if the roth invested in stockmarket and bond and i want to take out(sell) money ...whats the rule?

[@patrickpei4442]

Thank you for the great video! Quick question on gains: when you talk about "gains", do they also include gains from taxable conversion and nontaxable conversions?

[@RetirementPlanningEducation]

Yes, "gains" are gains on 1) contributions, 2) taxable conversions and 2) non-taxable conversions

[@pjdengler0]

I’m with Charles Schwab. I recently put in 6k ad the deadline is approaching. However, I realized that I need all that money now. I haven’t invested anything at all. When I go to transfer the money back to my bank account, I get the option to turn on and off taxes. Can I just turn both off then off since it was just my initial contribution? I’m just really worried that I’ll do something “wrong” if I do turn them off. Also, will I need to fill out any specific tax form if I do this??? Would appreciate your answer as I went in to Schwab and messaged other members and they couldn’t give me a direct answer

[@RetirementPlanningEducation]

Hi. Schwab can't give you a definitive answer about withholdings because that would be giving you specific tax advice. And they can't give you specific tax advice without knowing the rest of all of your sources of income, tax credits, other withholdings or estimated payments, etc. For those same reasons, I can say specifically what your withholdings should or shouldn't be. But know that you can tax out up to the amount of your contributions in Roth IRAs at any time without tax or penalty. And when you do your tax return for 2022, you'll get a 1099-R from Schwab showing the $6k distribution. It's up to you to separately keep track of how much you've contributed to Roth IRAs in your lifetime vs how much (if any) you've thus far taken out. So long as you haven't cumulatively taken out more than what you cumulatively contributed, there is no tax or penalty on that distribution. But depending what tax prep software you use, I'm not sure of what steps you have to do in that software to denote that distribution as a removal of your contribution.

[@AXLee27]

Straight to the point. Love it

[@RetirementPlanningEducation]

Thanks!

[@Stephen-Harding]

Question: I am 64 years old and employed and have a 401k through my employer. I have a separate Roth IRA that was opened 6 years ago. Can I make excess AFTER-TAX contributions to my 401k and then convert those excess contributions to my existing Roth IRA without tax or penalty. Seems like this would allow me to exceed my normal max yearly contribution to my Roth IRA by first running the money through my 401K and then converting it to the Roth. Because the Roth account is more than 5 years old and I am 64, those conversions, and any gains on those conversions, would be tax free and could be withdrawn at any time. Am I correct?

[@RetirementPlanningEducation]

First check to see if your employer has a Roth option within the 401(k). And if they do, do they allow "in-plan" Roth conversions of after-tax contributions into the Roth portion. If they don't, the next question to ask is whether they allow in-plan rollovers out of the plan. If they don't, then you're stuck...you won't be able to roll money out while you're still employed. But if they do, then you you can sort of do it. But you can't cherry pick to roll out JUST the after-tax contributions. Every dollar you roll out will be prorated portions of after-tax and pre-tax money. The after-tax can go to a Roth IRA and the pre-tax can go to a traditional IRA.

[@Stephen-Harding]

@@RetirementPlanningEducation Thanks so much for the reply. It was helpful information

[@stevenobrien595]

Hi Andy, Great video! Quick question on figuring a Roth IRA basis. Early distribution under 59 1/2. Is it the total amount of contributions minus any distributions. Not touching the earnings...Would I also include the total amount of any conversions in the total basis amount overall? Thanks for your insight. Steve

[@RetirementPlanningEducation]

All distributions first come from contributions. Assume you've cumulatively contributed $50,000. And you've already taken out $10,000. You can take out up to $40,000 more before you deplete your contributions. If you take out anything above and beyond the $50,000 of total contributions, then you start taking out amounts you converted, if any.

[@stevenobrien595]

@@RetirementPlanningEducation Thank you Andy. Appreciate your response. Love this stuff! So different from the accumulation phase. Exciting but nerve racking too! 👍

[@aerovespr]

Great overview. Are there exceptions for qualified distributions from an account with conversions that have not yet matured (i.e. they have not yet met the 5-year waiting period)? For example, if I'm buying a home for the first time and need to withdraw funds, will I be required to withdraw the converted funds first and incur a 10% penalty for early withdrawal, or can I "skip" past withdrawing from the converted funds and take the $10K in qualified distributions from my earnings instead (penalty free)?

[@RetirementPlanningEducation]

Yes, the converted funds come out first under the "ordering" rules of Roth IRA withdrawals. The first dollars out are always going to be amounts contributed. Next are amounts converted, and finally are earnings. You unfortunately can't pick and choose which amounts come out first; the ordering rules dictate that :(

[@aerovespr]

​@@RetirementPlanningEducation Thank you! Did some more research, and I'm getting conflicting information that these ordering rules only come into play when dealing with *non-qualified* distributions, meaning qualified distributions get to "skip the line" and remain penalty-free[1]. I also see the same thing if I work through IRS form 8606 for 2022 (Parts II and III), where the first-time homebuyer's distribution is subtracted out first from your distributions, before factoring in the contributions, and finally the roth conversions[2]. Any thoughts are appreciated! [1] www.investopedia.com/terms/o/orderingrules.asp [2] www.irs.gov/pub/irs-pdf/f8606.pdf

[@RetirementPlanningEducation]

@@aerovespr Hold on, you might be on to something here. In looking at 8606, it does definitely read that qualified homebuyer usage is stripped out and THEN it's run through ordering for for non-qualified distributions. Good catch, thanks!

[@leonareyna581]

Thanks for the video! I have a question. I know there's a max amount you can put into your ROTH IRA a year, 6k for me. So if I do trades inside my ROTH IRA let's say for example I buy 1k of a stock and then it goes up and I sell it for 2k (making me a 1k return) does that extra 1k now count towards the amount I've put into my ROTH? like now I can only put 4k more in? (6k total - 1k from my original investment - 1k from my profit) or is it just me depositing the 6k and EVERYTHING I make in profits (dividends, sales, etc) are free game? And any profit I make in that case I can invest or cash out without any issues?

[@RetirementPlanningEducation]

Correct; gains inside the account have no impact on how much you can contribute.

[@dsmith4140]

What if you rollover a Roth 401k that has been opened for 5 years into a Roth ira that has been opened for 10 years? Has the 5 year rule been satisfied by the Roth ira that’s been open for 10 years?

[@RetirementPlanningEducation]

Correct; once in the Roth IRA, it’s the 10 years of the Roth IRA that is then used.

[@dsmith4140]

@@RetirementPlanningEducation thank you

[@wendellotanael5201]

Thank you for the explanation you answered a lot of my questions. Can you do one for HSA. I’m confused about when those medical expenses should be deducted from taxes. Or should they just be reimbursed from my HSA if you find this question confusing that’s because I am confused

[@RetirementPlanningEducation]

Great recommendation. I frankly don't know why I haven't yet done one on HSAs... I think what you're asking is whether or not you can take a deduction on your tax return for medical expenses AND also use your HSA to pay/reimburse those medical expenses. The answer to that is no. The IRS won't let you double-dip like that. It's double-dipping because any medical expense you pay or reimburse yourself with HSA funds is already tax-free, because the HSA is all tax-free money. Therefore, if you're already using tax-free money to pay for a medical expense via your HSA, you can't additionally deduct that expense on your tax return, because that expense would then lower your taxes even more.

[@RetirementPlanningEducation]

Actually, I just realized I did already do one on HSAs... kzbin.info/www/bejne/Y5PGd553a6mUipo

[@THECURELOST13]

what if i am not 60y/o yet and i want to withdraw a large amount from my roth (that is 10+ years old)? what is the penalty and tax hit? lets say for $1,000,000 and on 100% gains? i was hoping you'd cover the penalty part of this in the video but am grateful you did the 'positive' side of it so well. THANKS!

[@RetirementPlanningEducation]

It depends how much you cumulatively contributed to all of your Roth IRAs thus far, and how much (if any) you've taken out from any of your Roth IRAs. But it sounds like you're saying assume you've already taken out all of your cumulative contributions such that now you're taking out just gains??? In that case, the penalty is 10%. And that's on top of all of the withdrawals being taxable as ordinary income.

[@jasminefox3398]

If I have contributed $16000 over 4 years but my current balance is $15000 due to losses in the market can I withdraw that whole amount without being penalized since my contributions were greater than that?

[@RetirementPlanningEducation]

Yes, if you're talking about total aggregate contributions (across all Roth IRAs you have) during your life being $16k and the total current aggregate market value (across all Roth IRAs you have) being $15k, you can remove all of it with no tax or penalty - regardless of your age - since it's less than the total amount of your contributions.

[@lydialee5444]

Great video very informative, I just have a question. I’m 64 now and stop working since last year but not collecting social security yet. Can I still make Roth contribution to my account? If I can I don’t need to hold it for 5 years anymore if say I started getting the distribution in three years right? Thank you andy your channel had helped a lot of people. God bless!

[@RetirementPlanningEducation]

If you don't have any earned income (i.e. wages or self-employment income) for the year, or if you're married and neither you nor your spouse have any earned income for the year, you can't make any Roth IRA contributions for the year.

[@johnsun2416]

I wont do taxable conversion after watching this video, because I want to withdraw my money at any time I need them.

[@ladyapollia2]

I had to withdraw from my Roth IRA last summer because of Covid wrecking my business. I am still hurting and need to withdraw again - I fine paying penalties etc but I can’t find anywhere on the internet whether I am even allowed to early withdraw more than one time in a year.

[@RetirementPlanningEducation]

There is no limit on the number of withdrawals you can make in a year

[@ericmurphy3970]

excellent! The 1099-r box 7 code "j" is a curious one. it seems to be an elastic code for the regular contribution, taxable and nontaxable contribution withdrawal when you have satisfied the cumulative 5 year wait period. I suppose, provided you have all of the statements to confirm the withdrawals, an audit should be straight forward and a waste of the IRS' time to even begin one! 'Mercia! the principle savings one has put away for 5 years can be liquidated quickly for an emergency action and that interest could still compound into a tidy sum until the big 6-0.

[@ryuyamakawa4431]

How to use Roth IRA for kids' college costs?

[@lauracastillo8417]

I would appreciate more details on the earnings that would be taxed🤔