Liquidating a roth ira

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However, taxes are only assessed on the earnings portion of the withdrawal.Since Roth contributions are made with after-tax dollars, you do not need to pay taxes on that portion again.The Roth IRA, on the other hand, allows qualified distributions to be free from tax and penalties.Here we review the tax treatment of Roth IRA distributions.

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For example, if the first Roth IRA contribution was made for 2012, the five-year period begins Jan 1, 2012.To make a "qualified" withdrawal from a Roth 401(k) account, the account holder must have been contributing to the account for at least the previous five years and be either 59 1/2 years old, deceased, or completely and permanently disabled.Because contributions to a Roth plan are made with after-tax dollars, you do not need to pay income tax on qualified distributions, though you would still report them to the IRS on Form 1099-R when filing your taxes.Do you think taxes when you retire will be higher or lower than they are today?If you suspect that taxes – and specifically, your taxes – are likely to be higher when you retire, a Roth IRA may be a good option for your retirement savings.

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