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Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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If I am under 59 1/2, can I pull out the principal of my ROTH

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If I am under 59 1/2, can I pull out the principal of my ROTH IRA anytime without tax and penalty for any reason?

Under what circumstances can I pull out principal and earnings without paying taxes and penalty? I have heard 10K max for a first time home, and a similar amount for a child or grandchild's college education.

Lastly, would you recommend a parent fund a ROTH IRA in their name rather than a child's 529 plan if the intent is for college education? Any strategic insight would be deeply appreciated. Thank you.


Hi and welcome to Just Answer!
You are correct - because your original contribution into Roth IRA is made with after tax funds - the distribution of the principal is subject of neither income taxes nor early distribution penalty.
Moreover - there is a set order in which contributions (including conversion contributions and rollover contributions from qualified retirement plans) and earnings are considered to be distributed from your Roth IRA. According to these rules - your regular contributions are considered distributed first.
That means - if for instance - you have in Roth IRA account $10,000 of regular contributions and $800 in earnings - and if you request $10,000 to be distributed - that amount will be classified as a distribution of your original contribution and as such will not be taxable.


If you receive a distribution from Roth IRA that is not a qualified distribution, you may have to pay the 10% additional tax on early distributions.
A qualified distribution is any payment or distribution from your Roth IRA that meets the following requirements.
1. It is made after the 5-year period beginning with the first taxable year for which a contribution was made to a Roth IRA set up for your benefit, and
2. The payment or distribution is:
a. Made on or after the date you reach age 59 1/2,
b. Made because you are disabled (defined earlier),
c. Made to a beneficiary or to your estate after your death, or
d. One that meets the requirements for the First home buyers (up to a $10,000 lifetime limit).


Unless one of the exceptions listed below applies, you must pay the 10% additional tax on the taxable part of any distributions that are not qualified distributions.Exceptions. You may not have to pay the 10% additional tax in the following situations.
--You have reached age 59 1/2.
--You are totally and permanently disabled.
--You are the beneficiary of a deceased IRA owner.
--You use the distribution to buy, build, or rebuild a first home.
--The distributions are part of a series of substantially equal payments.
--You have unreimbursed medical expenses that are more than 7.5% of your adjusted gross income.
--You are paying medical insurance premiums during a period of unemployment.
--The distributions are not more than your qualified higher education expenses.
--The distribution is due to an IRS levy of the qualified plan.
--The distribution is a qualified reservist distribution.


While Roth IRA funds MIGHT be used to pay college education expenses - the purpose of having Roth IRA is to save for retirements - not for college education.
529 plans are specially designed for education. There are some advantages - in particular - some states allow deductions for state income tax purposes, some plans allow to lock education costs, etc. However - funds in 529 plans belong to the child - so if your child will be eligible for subsidized loans or educational aid - that might work against your child's eligibility.

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