Rental Property Investor · Cleveland, OH · Member since 2017 · 24 posts · 9 votes
Hi All - I am 31 years old and found a duplex with a lot of upside but it has to be a cash purchase. I want to pull money from my Roth IRA but want to do it correctly so I don't get hit with taxes and penalties. I am 31 years old.
Retirement savings history: I started contributing to my company's Roth 401k option in 2010. I left that job in 2015 and rolled the money into a Roth IRA. Are these contributions eligible for withdrawal without tax and penalty? If so, how do I find out my contributions versus the growth so I don't pull from any growth? In 2015, I opened a Roth IRA with Charles Schwab and started contributing. How can I find out how much I've contributed here and is this eligible for withdrawal without tax and penalty?
Thanks in advance for the help! I only have about a week to get the funds together and my tax guy is slammed right now so I haven't been able to reach him.
Investor · Pittsburgh, PA · Member since 2015 · 1k+ posts · 1k+ votes
8y
@Michael Forbes that is such an important question you absolutely need to seek an expert. Contact a well versed CPA or your IRA manager. In my experience I have had many clients buy property in a self directed IRA. They have moved their traditional IRA money to an SDIRA management firm and bought real estate through the SDIRA. But again before you do anything seek out some experts. Best wishes to you.
Investor · Pittsburgh, PA · Member since 2015 · 1k+ posts · 1k+ votes
8y
@Michael Forbes that is such an important question you absolutely need to seek an expert. Contact a well versed CPA or your IRA manager. In my experience I have had many clients buy property in a self directed IRA. They have moved their traditional IRA money to an SDIRA management firm and bought real estate through the SDIRA. But again before you do anything seek out some experts. Best wishes to you.
Information about contributions to your Roth IRA can be found on the year-end summary statement from the bank, broker, or mutual fund that holds your account. If you had a Roth retirement plan at work, contributions to it will be indicated on your W-2 in Box 12 with code: AA: Roth 401(k) plan. In addition, For your Ira, You should have filed IRS form 8606 maintaining your basis or contributions each year and your accountant may know. Otherwise look at your annual 5498 forms provided by your Ira custodian/administrator. You were smart to keep the accounts seperste.
You may want to consider using your IRAs to purchase the property and not pay any tax and or penalty.
The contributions from your Schwab Roth IRA account should be able to be withdrawn without any tax or penalty..
The 401k Roth money is a bit more challenging especially since you rolled it into a Roth IRA. If it was still in the 401k the money would be pulled out on a Proratta share. In addition your rollover from the Roth 401k is less than 5 years old. I am not sure but I will research it today. So the question is -are the rolled over 401k contributions considered as 401k or Roth IRA contributions at this time. Great question.
If you are not aware yet, a Roth IRA can be invested in real estate and may be a good way to continue to grow your Roth IRA tax-free funds.
The rules require Roth IRA assets to be distributed in the following order: regular contributions, conversions and retirement plan rollovers, and earnings (IRC Sec. 408A(d)(4) and Treas. Reg. 1.408A-6).
When regular contributions are entirely distributed, conversion and retirement plan rollover assets (excluding designated Roth 401k rollover assets) are considered distributed next. If more than one conversion or plan rollover (not including designated Roth 401k account rollovers) was made to an individual’s Roth IRAs, the conversion/rollover assets are distributed by year, generally following the concept of “first-in, first-out.”
The Roth IRA distribution rules can be complex if you have transferred Roth 401(k) funds into the Roth IRA.
For example, if the Roth 401k funds have not satisfied the 5 year holding period, the earnings on the Roth 41k cannot be distributed from the Roth IRA without paying taxes on the earnings until the Roth 401k funds have met the 5 year holding period in the new Roth IRA and you have reached age 59 1/2.
Therefore, you will need to separately track the Roth 401k earnings in the Roth IRA if you plan to take distributions from the ROTH IRA before the 5 year clock has been satisfied.
Investor · White River Junction, VT · Member since 2012 · 42 posts · 14 votes
8y
I recently pulled contributions out of my Roth IRA Fidelity account tax free and penalty free since my first contribution was over 5 years ago. You should call Charles Schwab. They should have the answers for you and be able to help.
@Derek P.- Hi Derek, when you pulled the fund from Fidelity, did you only pull the contributions or including the earnings as well? I am actually planning to pull mine as well from fidelity to fund a deal.