My husband and I have roth IRAs that orginally combined was 22,000 dollars but it has gone done to 18,000?

Question

so now my husband would like to withdraw all the funds, we will have our first child due in November and he said it would help with expenses and he thinks the IRA value will go down even more, we are 28 and 34 years old. What are the consequences of withdrawing the funds early. I know there be will be taxes, but how much should we expect to take home. 20,000 is the total original amount we put in.

Answer 1

You can take out whatever money you have put into a Roth IRA at any time without any tax penalty.  You have already paid taxes on the money.  The only part you cannot take out without paying taxes is any capital appreciation or dividends that you have earned.  

So for example if the total amount you contributed adds up to $15,000 and now it is worth $18,000 because of interest and capital appreciation, then you can still take out the original $15,000 without penalty, but you would have to leave in the remaining $3,000 in.  If you wanted that last $3,000 as well, then you would have to pay income taxes on that as well as a 10% penalty.  The only exception is if you are going to use that money to buy a house.

But I wouldn't panic and take it out for no reason, just because you think the stock market is going to go down more.  The stock market is now on sale.  You should be buying more now and saving for your retirement.  Don't wait until stocks are back at full price to start saving for your retirement again.

Oh ok, I see you said that $20,000 was the original amount you put in, so you are sitting on a loss.  That means you can take out the whole amount, $18,000, without any penalty at all.  You have already paid taxes on this money and it is your money.  But still, I wouldn't take it out if you don't really need it, just because stocks are on sale.  A few months from now the stock market will be back up and you will earn your money back.  This is supposed to be retirement money, so you have to think about what the stock market will be like decades from now.  Even if the market goes lower in the next couple months, it will come back before you have a chance to buy at the bottom.  You should be adding more now while stock prices are low.  But if you really, really need it with a baby coming, I could see how you might want to take it out now.

Answer 2

Withdrawing the funds is something u don't want to cause not only the value has gone down withdrawing the money before it matures you'll be taxed for early withdraw.I think the best way to handle this situation is to rollover the ira account to a reputable company that has been performing well.Like T.ROWE PRICE CO. for example.I believe there is no fees when rolling over your ira funds but do the research.

Answer 3

Part of the equation is what tax bracket are you in and can you possibly qualify for a qualified withdrawal (check with an advisor on this).  Also, how much of the $18,000 did you you and yoru husband contribute (remember, since this is a Roth, you already have paid taxes on your contributions).  However, there will also be a 10% penalty for withdrawing your Roth early.  At a minimum, you would have to pay $1,800 for the penalty and then taxes on any profits (Value sold - contributions).  If you sell today, you are looking at no more than $16,200.

Answer 4

On an 18000 IRA expect to pay around 5000 or more in taxes and penalties.  You would be better off borrowing money against it and leaving it in the account.