My Roth IRA has lost money in the 9 years since I opened it. Can I close it without facing a penalty?

Question

I opened the IRA with $2,000 of already-taxed money in 1999 and have made no deposits since. The current balance is $1,986. I'm under 59 1/2 years old. The woman I spoke with at the bank didn't mention any penalty, but now I'm starting to second guess myself.

Answer 1

With a Roth IRA, you can always withdraw your contributions without tax or penalty.

If the account is worth less now than your contributions to it over the years, YES, you can take the money out penalty free and tax free.

Note:  You will still receive a 1099R with Code J at the end of the year.  This form will show the gross distribution.  You calculate the taxable amount (in your case $0.00) on Form 8606.

Answer 2

No. You can't...you will face a penalty. 10% and a federal and State tax. Believe me, everbody's retirement account have lost money these days. I am sure, by the time you reach retirement age, you will have gained money back. Don't think about it too much.

Answer 3

Because you are under 59 1/2, there will be an early withdrawal  penalty of 10%.  In order to withdraw tax free and without penalty, you must have the Roth in place for 5 tax years (which you do) and be 59 1/2 or older (which you are not).

Answer 4

It depends on why you are withdrawing the money. See http://www.smartmoney.com/retirement/ira...