Roth IRA Question?

[DawnCt1]

DS#1 returned to school as a full time student last fall. While he was working he had a retirement fund which his employer contributed to minimally; I don't think it was a 401K. When he left that job, he rolled it (whatever it was)over to a Roth IRA, and paid the the taxes up front to do so. Now that he has returned to school, he wants to withdraw some of his funds. It seems that I have read that you can withdraw funds for educational expenses. Does anyone know the rules?

 

[beckmrk04]

Yes, it is possible. A Roth has to have been open at least 5 years though, or there will be a penalty.

If you go to www.irs.gov and look up Publication 590 (IRAs) it spells out the rules for both Tradtional and Roth IRA distributions.

 

[DawnCt1]

Yes, it is possible. A Roth has to have been open at least 5 years though, or there will be a penalty.

If you go to www.irs.gov and look up Publication 590 (IRAs) it spells out the rules for both Tradtional and Roth IRA distributions.

It was easier to call. Here is what the man at the IRS said. He said, that if its just a return on the original investment and he earned no money in it, its not a taxable event, nor is it penalized. I did explain to him that it came from another source originally, and he didn't seem to comment on that. It is less than he put in but he feels he needs it. So if its less or the same, no taxable event and no penalty....I hope.

 

[golfgal]

DS#1 returned to school as a full time student last fall. While he was working he had a retirement fund which his employer contributed to minimally; I don't think it was a 401K. When he left that job, he rolled it (whatever it was)over to a Roth IRA, and paid the the taxes up front to do so. Now that he has returned to school, he wants to withdraw some of his funds. It seems that I have read that you can withdraw funds for educational expenses. Does anyone know the rules?

How much is the fund and how much is he taking out? If it isn't much the penalty is only 10%. Maybe you could loan him the money using the Roth as collateral so he doesn't have to do that. Also, it would have been wiser if he was already paying the taxes and penalty on this account when he took it out of his employee account to put it into a fund where he would have had tax free access to the money. He might want to consider doing that now since he is going to access the money anyway-move it into a whole life insurance policy where you can take a loan against the cash value, as one example.

 

[CPT Tripss]

It was easier to call. Here is what the man at the IRS said. He said, that if its just a return on the original investment and he earned no money in it, its not a taxable event, nor is it penalized. I did explain to him that it came from another source originally, and he didn't seem to comment on that. It is less than he put in but he feels he needs it. So if its less or the same, no taxable event and no penalty....I hope.

Go to the Pub! Either you were misinformed or you misunderstood.