Completely liquidate risky Roth IRA to pay for law school? Forum

[chiquita2201]

Contributions to a Roth only come out tax and penalty free if they have been in the Roth for 5+ years. Otherwise, say if you take them out before 5 years, there will be a 10% on the contribution as well as any earnings. Taxes are always only on earnings.

[Puttanesca]

Contributions to a Roth only come out tax and penalty free if they have been in the Roth for 5+ years. Otherwise, say if you take them out before 5 years, there will be a 10% on the contribution as well as any earnings. Taxes are always only on earnings.

I've had my Roth IRA open for about 10 years, so the 5-year thing won't be a problem for me.

[albusdumbledore]

Contributions to a Roth only come out tax and penalty free if they have been in the Roth for 5+ years. Otherwise, say if you take them out before 5 years, there will be a 10% on the contribution as well as any earnings. Taxes are always only on earnings.

I've had my Roth IRA open for about 10 years, so the 5-year thing won't be a problem for me.

How's this even possible? You've been contributing to a roth since you were 12? You have to have income to contribute. Also, that's not true on the 5 year thing for contributions. You can take contributions out of a Roth at any time.

[Faceplant]

Contributions to a Roth only come out tax and penalty free if they have been in the Roth for 5+ years. Otherwise, say if you take them out before 5 years, there will be a 10% on the contribution as well as any earnings. Taxes are always only on earnings.

pretty sure that is factually incorrect

http://www.smartmoney.com/retirement/pl ... free-7958/

the 5 years doesn't matter for a roth ira used for higher education expenses

[Tiago Splitter]

Contributions to a Roth only come out tax and penalty free if they have been in the Roth for 5+ years. Otherwise, say if you take them out before 5 years, there will be a 10% on the contribution as well as any earnings. Taxes are always only on earnings.

pretty sure that is factually incorrect

http://www.smartmoney.com/retirement/pl ... free-7958/

the 5 years doesn't matter for a roth ira used for higher education expenses

To avoid taxes on a Roth distribution, you have to reach the five year mark and either age 59.5, death, disability or first time home purchase. Higher education expenses won't exempt the taxes, but will exempt the penalty, regardless of whether or not the five year mark has been reached.

But taxes are only ever assessed on earnings. Contributions always come out first and are always tax and penalty free.

[Puttanesca]

Contributions to a Roth only come out tax and penalty free if they have been in the Roth for 5+ years. Otherwise, say if you take them out before 5 years, there will be a 10% on the contribution as well as any earnings. Taxes are always only on earnings.

I've had my Roth IRA open for about 10 years, so the 5-year thing won't be a problem for me.

How's this even possible? You've been contributing to a roth since you were 12? You have to have income to contribute. Also, that's not true on the 5 year thing for contributions. You can take contributions out of a Roth at any time.

Yeah, I've had the Roth IRA since I was 12. It was set up through my mom's business. Before I started working, she made some contributions to it.

And thanks guys for clearing up the 5-year thing. Good to know.

[glewz]

If you can get more than 8% in a more stable option do that, if you can't then use it for law school - but commit to repaying it as quickly as possible to make up for not having to repay loans (ie pay what you would have paid in repayments into investments/savings instead)

I agree with NYC Law, but where can you get >8%?

[Faceplant]

ugh!

i would use my roth iras to pay for school but they're all down 20+% in the past 90 days. I'm gonna ride this one out before i cash out. if it comes back 20% within the 120 day grace period for returning gradplus loans, i'll cash out and pay back what i can. I just can't live with myself taking that kind of a loss right now. if i have to wait it out till 2nd or 3rd year i will too. i'moan git my 20% back!

[glewz]

ugh!

i would use my roth iras to pay for school but they're all down 20+% in the past 90 days. I'm gonna ride this one out before i cash out. if it comes back 20% within the 120 day grace period for returning gradplus loans, i'll cash out and pay back what i can. I just can't live with myself taking that kind of a loss right now. if i have to wait it out till 2nd or 3rd year i will too. i'moan git my 20% back!

Dang :\ sorry to hear that. GL - rootin for you!

[Puttanesca]

ugh!

i would use my roth iras to pay for school but they're all down 20+% in the past 90 days. I'm gonna ride this one out before i cash out. if it comes back 20% within the 120 day grace period for returning gradplus loans, i'll cash out and pay back what i can. I just can't live with myself taking that kind of a loss right now. if i have to wait it out till 2nd or 3rd year i will too. i'moan git my 20% back!

Damn...20%. Good luck! Maybe my investments aren't so bad then? My Q2 statement shows a rate of return of somewhere between -3 to -4%.

[shoeshine]

Take it out for law school. There is no point in paying interest on a loan and having that money sitting around. Unless you put it in a fund that can consistently beat federal loan rates (6.9% and 7.9%) then there is no point in keeping it invested.