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. What are the benefits and advantages of the Teacher Retirement System?

    Learn about some of the primary benefits of a teacher retirement system and what similarities it has with other types of ...
  2. What are the differences between a Pay As You Go plan and a 401(k)?

    Compare a 401(k) plan with a pay-as-you-go pension plan; both offer investment flexibility and control by the participant ...
  3. How are payments calculated on a Canadian Pension Plan (CPP)?

    Learn what factors are considered when calculating your Canada Pension Plan retirement benefits, and discover how to get ...
  4. Are Social Security benefits affected by unemployment benefits?

    Find out if Social Security benefits are affected by unemployment benefits, and if so, how much this benefit can be reduced ...
RELATED TERMS
  1. Elder Care

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

    Definition of Gold IRA
  3. Eligible Transfer

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

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

    The use – by a business owner or professional practitioner – ...
  6. Peri-Retirement

    A term for the period of time leading up to actual retirement. ...
Related Articles
  1. Roth IRAs: Investing And Trading Do’s ...
    Retirement

    Roth IRAs: Investing And Trading Do’s ...

  2. How Does A Reverse Mortgage Work?
    Retirement

    How Does A Reverse Mortgage Work?

  3. 5 Key Factors Your Financial Plan May ...
    Retirement

    5 Key Factors Your Financial Plan May ...

  4. The Right Place To Retire
    Retirement

    The Right Place To Retire

  5. Closing In On Retirement? Read These ...
    Investing Basics

    Closing In On Retirement? Read These ...

Trading Center