roth ira

[Unregistered]

If I put $4,000.00 into a Roth IRA and in 15 years I want to pull out money for my kid's college I know I can take out my principal {$4,000.00} at any time for any reason without tax or penalty. What would happen if I took out more than my principal? Would it be subect to income tax and penalty?

Thanks.

Vernon & Margie Albright

[Matt Sova]

Current law

The current law would subject the withdraw to tax only, not the 10% penalty. Of course, in 15 years, if you are over 59 1/2 then it will not be subject to tax either.

You may also want to look at a 529 plan. Withdraws from these for education are not subject to tax (currently, prior law was subject to the beneficiary's tax rate) or penalty. This is something you should really sit down and discuss with a qualified tax professional in your area as well as a financial advisor.

Matt

[Unregistered]

depends how old you will be in 15 years

if you will be younger than 59 1/2, but have had the account open for more than 5 years than you would pay a 10% penalty, but no income tax.

if you are older than 59 1/2 in the year of the distribution than there is no income tax nor penalty.

hope this helps.

JoshInNC

[Unregistered]

I retract my earlier post

If paid for your child's qualified higher education costs no tax or penalty.

This is covered in Publication 590 under Early Distributions.

I do agree with Matt that you and your wife should seek advice from a competent advisor on the options available to you.

JoshInNC