If If you withdraw your Roth IRA contribution, the amount will be tax and penalty free. If your initial contribution accrued earnings while in the Roth IRA and you also withdraw the earnings, the earnings will be subject to income tax. Furthermore, if you are under age 59.5, the withdrawal will be subject to an early distribution penalty as well, unless you meet an exception to the penalty. Both the tax and the penalty apply because your distribution is not a qualified distribution.
As an alternative to withdrawing the amount, you may consider transferring the balance to the new financial institution with which you plan to establish your new Roth IRA. A transfer is a tax-free movement of assets between retirement plans. The Roth IRA established to receive this transfer could also be the same Roth IRA to which you make your contribution for tax year 2007 and future years. Your new financial institution will be able to assist you with the necessary paperwork to effect this transfer. Alternately, you could request a distribution of the assets and make a rollover contribution to your new Roth IRA within 60 days after your receive the distribution. A rollover is also a tax-free movement of assets between retirement plans.
Please bear in mind that you must meet certain income requirements in order to make a Roth IRA contribution. For 2007 they are as follows:
You are able to contribute 100% of compensation up to $4,000 ($5,000 if you are at least age 50 by the end of the year for which you are making the contribution) your modified adjusted gross income cannot exceed:
- $114,000 if you are single (the $4,000 limit is reduced if you earn between $99,000 and $114,000)
- $166,000 if you are married filing jointly (the $4,000 limit is reduced if you earn between $156,000 and $166,000)
- $10,000 if you are married filing separately (the $4,000 limit is reduced if you earn between $0 and $10,000)
This question was answered by Denise Appleby
Learn how offering fringe benefits allows employers to entice new talent to join their teams, although part-time workers ...
Learn about the groups of people who qualify for exemption from Social Security taxes, and explore the process of applying ...
Learn how to calculate the percentage of Social Security income benefits that may be taxable, and discover strategies to ...
Understand the difference between fixed, variable and indexed annuities, and read a brief summary of their respective risks ...
Senior move managers (SMMs) help seniors downsize and relocate ...
Elder care, sometimes called elderly care, refers to services ...
Definition of Gold IRA
An IRS-allowed movement of assets into or out of an individual ...
Also known as Social Security Death Index. A list of people whose ...
The use – by a business owner or professional practitioner – ...