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February 17, 2011

Will distribution from Roth IRA Contribution be taxed?

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Will distribution from Roth IRA Contribution be taxed?

I just put $6,000 in a https://retirementdictionary.com/definitions/rothira Roth IRA CD as a contribution. These were funds previously taxed. When I withdraw these funds will they be taxed again?

Answer

Distributions of amounts contributed to your Roth IRA are always tax-free. The earnings accrued on those amounts are also tax-free if the distributions are < https://retirementdictionary.com/definitions/qualifieddistributionrothira qualified. If the distributions are not qualified, the earnings will be taxable and will be subject to the 10% https://retirementdictionary.com/definitions/earlydistributionpenalty early distribution penalty, unless an https://retirementdictionary.com/definitions/earlydistributionpenaltyexception exception applies. Bear in mind that under the https://retirementdictionary.com/definitions/orderingrulesrothira ordering rules, contributions are distributed first and earnings are distributed last. As such, if your distributions (over the years) do not exceed your aggregate contributions made over the years, the distribution amount will be tax and penalty free. REMINDER: You can fund a Roth IRA, only if your https://retirementdictionary.com/definitions/modifiedadjustedgrossincomemagi modified adjusted gross income (MAGI) is below a certain amount. For these MAGI limits, click https://retirementdictionary.com/definitions/rothira" here. Answer provided by http://applebyconsultinginc.com/ Appleby Retirement Consulting Inc. Appleby Retirement Consulting Inc provides Consulting, Coaching and Content on IRAs and other retirement plans to Financial, Tax and Legal professionals.

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