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Old 02-04-2015, 08:58 AM
 
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I have a Roth IRA. When I retire, I would like to take a sizeable chunk of money out to pay off my mortgage and do a few home repairs. Is there any reason why I wouldn't be able to do this? I wouldn't have to pay any tax on any of it, would I? Or any sort of penalty?
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Old 02-04-2015, 10:16 AM
 
Location: WA
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Check the rules but as far as I know if you are >59.5 and the funds are over five years in the account you should be able to do this without a tax impact.
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Old 02-04-2015, 10:43 AM
 
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
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As above + your 'contributions' are exempt from tax or penalty pre age 59.5 (with conditions, many retire pre-age 59.5).
Roth IRAs: Distributions | Investopedia
Publication 590 (2013), Individual Retirement Arrangements (IRAs)
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Old 02-04-2015, 11:52 AM
 
Location: Central Massachusetts
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Quote:
Originally Posted by iarwain View Post
I have a Roth IRA. When I retire, I would like to take a sizeable chunk of money out to pay off my mortgage and do a few home repairs. Is there any reason why I wouldn't be able to do this? I wouldn't have to pay any tax on any of it, would I? Or any sort of penalty?
Short answer is yes.

Quote:
Originally Posted by cdelena View Post
Check the rules but as far as I know if you are >59.5 and the funds are over five years in the account you should be able to do this without a tax impact.
This is essentially incorrect. There is a tax impact. You were though referring to the early withdrawal penalty prior to 59.5. I just wanted to clear that up. You are right that there is no penalty.


If you do the entire mortgage iarwain be weary about the actual amount you pull out will be taxable.
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Old 02-05-2015, 07:57 AM
 
Location: Central Massachusetts
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I just actually noticed. You said it is a Roth. In that case that is tax free so one no penalty and two no tax. Sorry for my confusion.
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Old 02-05-2015, 12:13 PM
 
Location: it depends
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You can do it, but do you want to? The money in your Roth can produce tax-free income for the rest of your life. Consider just taking out enough in a lump sum to do the repairs, and then set up a monthly withdrawal equal to your house payment. If you invest in high yield stocks, sooner or later you will end up with a paid off house AND a sizeable Roth balance.

Don't do this if you would be prone to wet your pants and sell out low in a downturn. If so, your original plan is best.
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Old 02-05-2015, 01:35 PM
 
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
22,691 posts, read 40,062,283 times
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Quote:
Originally Posted by marcopolo View Post
You can do it, but do you want to? The money in your Roth can produce tax-free income for the rest of your life. Consider just taking out enough in a lump sum to do the repairs, and then set up a monthly withdrawal equal to your house payment. If you invest in high yield stocks, sooner or later you will end up with a paid off house AND a sizeable Roth balance.

Don't do this if you would be prone to wet your pants and sell out low in a downturn. If so, your original plan is best.
true, I don't advocate drawing down a ROTH, as it has much flexibility and I keep my highest gains / greatest risk stuff there. I still roll from Traditional IRA to ROTH when I can do so for under 5% tax hit. (yrs with low earnings).

I am one that will keep a low interest mortgage throughout retirement, (I have 3.25% on 1st and second homes). It frees capital for other investments (I keep mortgage equity invested in secured real estate, such as a few 'paid-off' rental homes, just in case TSHTF, I have an escape plan).

Each retiree needs their own plan. ( I wish I could get mine to a SINGLE plan,,, finance 101, get a plan and stick with it until the facts (IRS changes / health) indicate you need to change the plan)

Thanks Golf, You had me reeling and searching WHY a ROTH would have tax or penalty. I benefited from my research yesterday (got some new ROTH ideas).

OP needs to add retirement age to keep us honest / accurate.

Retire Early, Retire Often!
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Old 02-05-2015, 01:59 PM
 
14 posts, read 10,658 times
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Thanks guys, that's pretty much how I thought it was, but I wanted some confirmation.

Regarding the suggestions to keep the money in the Roth instead of paying off the mortgage, I'll have to give that some consideration. It would be nice to get rid of that monthly bill though, that was my main thought. If I get rid of that, my cost of living goes down nicely.
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