Withdrawing Funds from Roth IRA BEFORE age 59 1/2

[goldnson]

I need access to money as I am temporarily not earning income.  I have over $100,000 saved in a Roth IRA which has been in place for over 5 years.  I am only 57.  I heard that I was able to take money from my Roth IRA without incurring any fees or penalties as long as I only took out money I actually contributed, not any of the interest or gains the funds earned while invested.  I am looking for verification that I have this option.  I look forward to confirmation!! Thank you.

[AJ]

The simple answer is yes.  It is an option. The math is straight forward to withdraw only your contributions if this is your first withdrawal; and if you have records for your contributions; and if you didn't do rollover contributions from a Traditional IRA. Form 8606 and Publication 590-B provide additional details. 

Be careful about the details if your Roth IRA contains funds that were rolled over from a Traditional IRA.  The rollover funds have their own 5-year clock.

Be sure to keep all Forms 8606 in case you need them for future tax returns. 

Finally, from the long-term financial standpoint, try to be sure that this your best option.  Older workers don't have long times to make up for the losses in principal when a withdrawal is made. So an early withdrawal adds risk for your future retirement needs.  

[noahmck81]

Can you explain more about the statement "The math is straight forward to withdraw only your contributions if this is your first withdrawal" ? Does this mean that making multiple withdrawals, rather than in one large one, will complicate things and/or result in penalties?

[AJ]

I could have used a better choice for words there. The process is probably "straight forward" even with multiple withdrawals.   Just be sure to keep your Forms 8606 and your Forms 5498 and know your basis.  I've encountered some people who do OK making their first withdrawal and then they lose track of their paperwork and make mistakes about their basis in following years.  If you are organized, then there should not be a problem.

[d4of5]

Yes you do have the option at any age to withdrawal "contributions only" from a Roth IRA.  You may also want to look at 401k rules for those 55 and over who have lost their job as there is a 401k "loophole" in those circumstances.

[Simone7000]

I took early distribution of my Roth IRA on funds that were contriubted over 5 years ago, in an account older than 5 years old.  The 1099-R form that Fidelity issued me has box 7 checked as "J", "early distribution from a Roth IRA, no known exception".  Turbotax doesn't give me an option to select my circumstance, thus wanting to tax the whole amount.  There were some proceeds in there which I understand are taxable.  

How can I fix this and not get taxed on the portion that shouldn't be taxed?  Thank you.

[DanaB27]

Yes, you can withdraw contributions you made to your Roth IRA anytime, tax- and penalty-free.  You will get follow-up questions where you can enter your net contributions prior to 2022.

Please follow these steps:

1. Login to your TurboTax Account 
2. Click on "Search" on the top and type “1099-R” 
3. Click on “Jump to 1099-R” and enter all your 1099-Rs
4. Click "Continue" on the "Review your 1099-R info" screen
5. Answer all the questions and make sure you enter the net contributions prior to 2022 on the "Enter Prior Year Roth IRA Contributions" screen
6. Answer the remaining question.