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You realize that ROTH IRA's are post tax and any contributions you make to them can be taken out penalty free at any time? No need to pay additional taxes because they are already paid and no penalties are paid as long as you take out the same amount or less $$ you put in.
The contribution must be in a Roth for five years before you can withdraw it without penality. Also if you recharacterize an IRA into a Roth and pay the taxes on the total amount, that sum cannot be withdrawn within five years either without penality. Long story short, only contributions that have been in a Roth for five + years can be withdrawn without penality. Interest earned on the contributions cannot be withdrawn before 59 1/2 without taxes and penalities unless used for education.
Hi,
NO, you see, this is why I gave up on this whole thread in the beginning. People spewing misinformation. As stated before, there's a loophole and YOU CAN TAKE IT OUT ANYTIME, even before 5 years. See this:
Hi,
NO, you see, this is why I gave up on this whole thread in the beginning. People spewing misinformation. As stated before, there's a loophole and YOU CAN TAKE IT OUT ANYTIME, even before 5 years. See this:
Texas, my statement stands, if you get a great deal on the land, and you can justify buying it "as an investment", then I have no problems moving money from one investment to another..
I hate when people say things that are clearly wrong. You can also take your contributions (not earnings) out of a Roth IRA at any time with no penalties, taxes, etc.
Anyhow, if you think the land is going to benefit you in the long term than it can make complete sense to use money from your Roth.
The contribution must be in a Roth for five years before you can withdraw it without penality. <snip>
I reread IRA Pub 590 and one sentence in a four sentence paragraph under the heading of "Are Distributions Taxable?" does say "You do not include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth IRA(s)." This means you would not pay income tax on the withdrawals of a Roth.
The next header defines Qualified Distributions and that is followed by the header called "Additional Tax on Early Distributions" and its' first sentence states "If you receive a distribution that is not a qualified distribution, you may have to pay the 10% additional tax on early distributions as explained in the following paragraphs." Another paragraph under the same header states "The 5-year period used for determining whether the 10% early distribution tax applies (bah, bah, bah), and is not necessarily the same as the 5-year period used for determining whether a distribution is a qualified distribution." It then lists a bunch of exceptions which do not apply to the original OP's question.
Under the heading "Ordering Rules for Distributions" it states "If you receive a distribution from your Roth IRA that is not a qualified distribution, part of it may be taxable." The paragraph lists the first withdraw from a Roth would be regular contributions.
I could not locate an IRS opinion on this specific topic. Using my own advice, I went to someone who knows. The opinion is that the OP's contribution would not be penalized and numerious financial Web sites also support this conclusion. So I stand corrected and sentence myself to four hours of reading the regs on the IRS Web site as punishment. If you want to read it for yourself, go to Publication 590 (2008), Individual Retirement Arrangements (IRAs). You will find it very exciting.
I'm in a bind. I got $10000 in my Roth IRA since I started contributions at age 26. I have a chance to buy 20+ acres out in the country in a very good land market. My parents are looking to buy the 20+ acres but I will put down the down payment and then we'll split the parcel in half. This will eventually be where I'd like to build my home in the next 5 years. I'd like to take $5000 from my ROTH and use it as part of the down payment. I know that once I take it out, I can't put it back in.
I'm going to be 29 soon. Is this OK or should I keep the $5k in the ROTH? We're hoping to buy the land in the next month or two.
Thanks for any advice.
Well, if you have at least $5000 in contributions, you can withdraw them without penalty, I don't know for sure about putting it back all in one lump, talk to your tax preparer, or read up on the regs. You can I think make the regular annual contribution that you would otherwise be qualified to make.
Having said that, if you don't have any other source for the money, *if* the land is a good enough deal, which I can't tell you from here, this *might* make sense. JKK makes a good point as usual, can/does this land give you any income? Pulpwood? Lease it to someone for agriculture? Rent a small plot of it to someone to store a motorhome, etc? I wouldn't want to rent it to someone as a residence, too easy to get a squatter on your land.
This is your retirement money and you should be reluctant to use it for something else.
I guess if the land is a really good deal, as confirmed to you by someone who does real estate around there but does not have "a dog in the fight", and you don't have any alternative source for the money, and assuming your income is relatively secure and stable, I'd say go ahead. But read and understand all the weasel words, not just "go ahead", OK?
I may end up just waiting out the market and seeing what happens to land prices for the next half year. The real estate market is just so weird right now. Mortgage rates going up...but more and more unemployment? Home construction costs doubling every year? People around these parts are STILL holding on to their land for ridiculous prices...although they are starting to drop a tiny little bit. But, how much longer can they wait? Lets face it, they made a mistake buying in the 06/07 frenzy..and that's part of the game and now they need to come back down to earth. Us, the buyers, can wait forever. I think I'm going to wait it out a little longer. In the meantime, I'll be saving up $$$ and hopefully wont' have to dip into my IRA. Buying land is a good investment, and if I had bought it in the early 90s, the return would've been much better than a retirement account. With land, at least you can enjoy it and use it...and then sell it for profit later. I wonder how many people are enjoying their 401ks right now.
Will this land produce any income or would you be just holding it for speculation that a developer will some day buy it?
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