@stone8pin wrote:
Tyler, so if a person has ONE Roth IRA and contributes $5,000 every year to this fund, then (after each successive 5 year period) a person can withdraw A MAXIMUM of $5,000 tax free per year without a penalty?
No, all contributions are contributions. Suppose you contribute $5000 per year for 5 years, and at the end, your balance is $29,000 because of investment growth. $25,000 is contributions and $4000 is earnings. You can withdraw up to the total amount of your contribution at any time for any reason without paying any tax. You could withdraw $5000 per year or all $25,000 at once, it doesn't matter. If you withdraw the earnings, you will pay income tax plus a 10% penalty, unless you are over age 59-1/2 and meet the 5 year rule.
You have to keep track of your contributions, conversion, and withdrawals, so that you, your tax software, or accountant, can know whether you are withdrawing contributions, earnings or conversions. The IRS can send you an inquiry at any time, and if you can't prove what you did, they can tax everything.
