Roth IRA Distributions

I first started a Roth in 1998(converted regular IRA's using 4 year Roth conversion plan) and recently due to job loss converted a 401K into a IRA and then into a Roth IRA.

My question is can I withdraw any amount from the Roth IRA penalty free?

Current value is around $20K and I hear I have to pay 10% penalty and also hear no penalty. Can anyone clarify

Thanks in advance,

Mark

Mark,

It depends on your reason for the withdrawal.

If your distribution is a “Qualified distribution” , the withdrawn amount will be tax and penalty free.

If the distribution does not meet the requirements to be a qualified distribution, then the following rules apply.

You did not mention any Roth IRA contributions, so I will assume you made none. My response is based on the assumption that your Roth IRA balance consists of two Roth IRA conversions and possibly earnings.

-If the amount you withdraw is equal to or less than the value of your 1998 Roth conversion, the withdrawal will be tax and penalty free.

-If the amount you withdraw is more than the value of your 1998 Roth conversion, but not more than your 1998 and recent conversion combined, the amount equal to the value of your 1998 conversion is tax and penalty free ( because it has been at least five years since these assets were converted). The balance will be considered from your recent Roth conversion and will be subjected to 10 percent early withdrawal penalty ( because it has not been at least five years since these assets were converted). , unless you qualify for an exception*

If the amount you withdraw is more than your 1998 and recent Roth conversion combined the amount equal to the value of your 1998 conversion is tax and penalty free.; The amount equal to your recent Roth conversion will be subjected to a 10 percent early withdrawal penalty, unless you qualify for an exception. The amount in excess of your 1998 and recent conversion combined will be subjected to ordinary taxes and 10 percent early withdrawal penalty, unless you qualify for an exception

* The exceptions are :

You are least age 59 ½ when the distribution occurs

You use the distribution towards the purchase or rebuilding of a first home for himself or a qualified family member.

You withdraw the amount after being disabled

Your beneficiary receives the assets after your death.

You use the assets for medical expenses for which you were not reimbursed.

Your distribution is part of a SEPP program.

You use the assets for higher-education expenses.

You use the assets to pay for medical insurance after you lose your job.

You assets are distributed as a result of an IRS levy.