I will know by Christmas whether or not I will be laid off(great timing), and I am trying to plan accordingly should that happen. I have $14,000 in Roth IRA contributions over the last 3 years. $9,000(now worth ~6,500)contributions from the first two years are at Fidelity. This years $5000 (presently about $16,000) at different brokerage.
Just for a little background info, I just bought a house in August and will be getting the $8,000 credit, and will make about $65,000 this year.
Should I lose my job and want to take out of my Roth IRA's, what options do I have?
Can I withdraw up to $14,000 in contributions now? Can I take a corrective distribution of this year's contribution and pay taxes on the earnings? Can I take a corrective distribution of 2009 contributions in 2010 and claim the earnings in 2010 when I may end up with very little income for the year? Any other suggestions?
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slack455 said:I have $14,000 in Roth IRA contributions over the last 3 years. $9,000(now worth ~6,500)contributions from the first two years are at Fidelity. This years $5000 (presently about $16,000) at different brokerage.
I've read this 5 times and am still not sure what you are communicating here.
If I understand, you contributed $4k in 2007, $5k in 2008 and this money has lost 28% over this time period now worth $6500.
And you contributed $5k in 2009 that has gained over 300% to $16k this year.
It doesn't affect the answer to your question, which is simply if the cost basis of your IRA contributions is $14k then you can take out $14k from whichever brokerages they are split throughout and there's no penalty or taxes.
slack455 said: Any other suggestions?Why isnt leaving it untouched an option? At most you should only withdraw your contributions, since you can do so without penalty, and leave the $11,000 in earnings in acct #2. Remember why you made the contributions in the first place, its a retirement account not an unemployment account.
Basic answer, as others have posted. You have ~22500 in your Roth IRAs. You can take out your $14000 contribution at any time without paying taxes or penalties (unless that money came from a rollover/Traditional IRA conversion, in which case, you will be paying taxes and penalties if you take it out less than 5 years after you converted).
However, the bigger question is why you're thinking of taking money out of your Roth. If you have to take money out of your retirement right after you lost your job, you have more serious issues to worry about -- specifically, can you even afford that house you just bought? You need to figure out how to cut back on everything. no more dinners out, cut the cable tv, cut the cellphone "extras", cut the grocery bills.
Try all that first before you touch your retirement. Otherwise you might be one of those foreclosure people who lost all their retirement savings. And I won't have any sympathy for you.
However, the bigger question is why you're thinking of taking money out of your Roth. If you have to take money out of your retirement right after you lost your job, you have more serious issues to worry about -- specifically, can you even afford that house you just bought? You need to figure out how to cut back on everything. no more dinners out, cut the cable tv, cut the cellphone "extras", cut the grocery bills.
Try all that first before you touch your retirement. Otherwise you might be one of those foreclosure people who lost all their retirement savings. And I won't have any sympathy for you.
Can you afford your mortgage indefinitely without a source of income other than unemployment? Probably not.
I am not looking at taking anything out immediately, I have my cash backup fund and I will get a severance, but I don't know how long I will be unemployed for if it comes to that. My mortgage payment is $1500/mo, I rent out two rooms for $1000/mo, and I have a fourth bedroom to rent if I need the money. So spare me your typical FW pretentious rant.
Message edited by: slack455 on 2009-11-04 23:36:20 CST
Glitch99 said:slack455 said: Any other suggestions?Why isnt leaving it untouched an option? At most you should only withdraw your contributions, since you can do so without penalty, and leave the $11,000 in earnings in acct #2. Remember why you made the contributions in the first place, its a retirement account not an unemployment account.
It most certainly is an option, it's actually my default option so I didn't bother to put it down. I knew the answer to my first question, I just didn't know how having my Roth money split between two accounts would effect that, especially given that the one account is in the red.
I don't have a crystal ball so it would be nice to know what my options are if say, my car blows up, roof collapses, etc. I'm just trying to get my ducks in a row and go the best route should it have to come to that.
InsuranceExpert said:Slack, did your $5,000 from this year grow to $16,000?
Slack, you may want to recharacterize your Roth IRA that you started this year. That way, you'll have the entire $16,000 available to you without penalties.
You will also then be able to remove the other Roth money without taxes or penalties since it is underwater.
If you don't recharacterize your Roth from this year, the IRS will treat as having one Roth IRA with a basis of $14,000. This is all that you would be able to remove without taxes and penalties.
What you should do will really be based upon your need for cash. The best, obviously, is not to touch the Roth.
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