I withdrew funds from my Roth IRA to contribute elsewhere. How will I be taxed?

By Denise Appleby AAA
A:

If you close the Roth IRA now and withdraw the balance, you will be taxed on the earnings unless the distribution is qualified. Furthermore, you will pay a 10% early distribution excise tax on the earnings unless you qualify for an exception.

The exceptions are listed on page 58 of IRS Publication 590. You will not owe any taxes on the principal.

If you are using the funds to contribute to another savings plan, find out whether your contribution is deductible. Some states allow a tax deduction for contributions made to such plans as prepaid college funds.

To learn more, read Taking Penalty-Free Withdrawals From Your IRA and Rules Regarding Substantially Equal Periodic Payment (SEPP).

This question was answered by Denise Appleby
(Contact Denise)

RELATED FAQS

  1. How does a defined benefit pension plan differ from a defined contribution plan?

    Learn the differences between defined benefit plans and defined contribution plans when reviewing employer-sponsored qualified ...
  2. What are the best ways to pay off my mortgage quickly?

    Learn how mortgage payments may be reduced and how to save thousands on mortgage loans by lowering the interest and principle ...
  3. How do deferred tax assets help in meeting retirement goals?

    Learn how tax deferred assets can help individuals achieve long-term financial goals such as retirement and how they differ ...
  4. What are the best ways to pay less income tax?

    Learn about reducing your income tax burden by contributing to an employer-sponsored retirement plan or IRA, and see what ...
RELATED TERMS
  1. Self Invested Personal Pension (SIPP)

    A tax-efficient retirement savings account available in Great ...
  2. Senior Move Manager

    Senior move managers (SMMs) help seniors downsize and relocate ...
  3. Elder Care

    Elder care, sometimes called elderly care, refers to services ...
  4. Gold IRA

    Definition of Gold IRA
  5. Eligible Transfer

    An IRS-allowed movement of assets into or out of an individual ...
  6. Death Master File (DMF)

    Also known as Social Security Death Index. A list of people whose ...

You May Also Like

Related Articles
  1. Professionals

    Are Longevity Annuities in 401(k)s a ...

  2. Professionals

    Why Retirement Advice Is Better But ...

  3. Professionals

    Coming Soon: Private Equity In 401(k) ...

  4. Professionals

    Ways To Cut 401(k) Expenses

  5. Professionals

    Tread Carefully With Retirement Plan ...

Trading Center