Withdrawing money from a Roth IRA

I’ve had a Roth IRA for some time but it’s only been in the last year or so that I’ve actively invested the money. My IRA sat idle for years doing nothing or close to nothing. When I purchased my first home I (briefly) looked into what types of tax-free distributions I could take and in the case of a Roth IRA it’s $10,000 for purchasing a home. Unfortunately that tax-free deduction doesn’t apply to non-owner lived homes (aka investment properties).

Recently I came across a couple of interesting articles talking about withdrawing contributions from an IRA, not earnings.

A Get Rich Slowly article says:

Q: Can I really withdraw money from my Roth IRA without penalty.

A: Yes, up to a point. You may always withdraw your contributions without penalty or taxes. For example, if you contributed $4,000 last year and the IRA is now worth $5,000, you can take $4,000 out of the account (leaving just the $1,000 in earnings) without consequence. There are taxes and penalties, however, for early withdrawal of earnings for non-approved uses. However, it’s important to note that once you withdraw the contributions you have just 60 days to replace them and after that the money can never be replaced again.

Another site called The Investment FAQ has more information on being able to deduct contributions but they also concur with the point made above that you can withdraw contributions tax-free and penalty-free at any time.

Wow. Good to know now. Also check out the Wikipedia 401(k) IRA Matrix.