Roth IRA Contribution Withdrawl
I'm confused by Roth IRA early Withdrawl. All of reddit, blind, etc. is convinced you can pull your contribution at any age penalty free, but if you go to IRS documentation they are very clear that you can't such as here https://www.irs.gov/retirement-plans/roth-iras "You cannot deduct contributions to a Roth IRA". I have found multiple IRS documents saying this, some are much more verbose in long technical documents. What gives? Is everyone just wrong about this? It's an important strategy for FIRE for some of us. The more detailed docs talk about how you can pull contributions as long as it's before taxes are due the following year, otherwise your access to contributions expires.
You’re confusing two different topics here, Roth IRA withdrawal is different from Tax deductions on contributions. Can you ask your specific question?
There are endless posts of people saying you can withdraw your contributions penalty free at any age. It's just earnings that would be subject to 10% fine if early age. This seems to be total BS, it's all locked up. But if so, it's amazing just how many people on financial forums are wrong about this. By every IRS doc I can find, a Roth conversion ladder was invented by the Internet and is fake and illegal...
True, you can withdraw principal anytime after 5 years. Returns are taxable and 10% penalty if withdrawn before 59 1/2. That is to bring it at par with any other non-retirement investment. They’re penalizing 10% to compensate for tax-deferred growth. I still don’t get what’s the confusion
https://youtu.be/8ycClERvACI has all the answers.
Deduct means tax deduction in this context, it means you must put after tax dollars into Roth IRA. But for withdrawal (distribution) of the contribution portion, it is indeed tax free. Read the tax code bulletin titled “Ordering Rules for Distributions” and the example to get a feeling of it.
Deduct != Withdrawal
Got it, I now see my confusion. It's still really hard to prove withdrawl is possible using IRS documentation, but I now see that I have to dig much deeper into the documents.