On Thu, Jul 3, 2014 at 9:04 AM, James A. Robinson <j...@highwire.org> wrote:
>> Which brings up another question: for a Roth IRA, one is able to obtain a
>> tax-free distribution up to the amount of its contributions way before
>> retirement (http://en.wikipedia.org/wiki/Roth_IRA#Advantages: "Direct
>> contributions to a Roth IRA (principal) may be withdrawn tax and penalty
>> free at any time"). This means that during the life of this Roth IRA
>> account, you have to keep track of the total amount of (contributions -
>> distributions taken).
So the full quote from the snippet you got from Wikipedia is:
Direct contributions to a Roth IRA (principal) may be withdrawn
tax and penalty free at any time.[1] Earnings may be withdrawn
tax and penalty free after 5 years if the condition of age 59½ (or
other qualifying condition) is also met. Rollover, converted (before
age 59½) contributions held in a Roth IRA may be withdrawn tax
and penalty free after 5 years. Distributions from a Roth IRA do
not increase Adjusted Gross Income. This differs from a traditional
IRA where all withdrawals are taxed as Ordinary Income, and a penalty
applies for withdrawals before age 59½
So that first sentence is simply discussing the difference between
a Roth IRA and a Traditional IRA when it comes to *early* withdrawal
of funds.
With the Roth, you're allowed to pull those principal contributions,
whereas with the Traditional IRA it's more restrictive, it's only
allowed for some very specific purposes (death, disability, medical
bills, and so forth).
Jim
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