Can I withdraw Roth IRA contributions tax-free on Fidelity?
Here’s a summary of the main problem reported by the user and the solutions discussed:
- Main Problem: The user is uncertain about the tax implications of withdrawing contributions from their Roth IRA, especially due to the label “EARLY DIST NO EXCEPT” on their account activity.
- Solution: FidelityAidan confirms that annual contributions from a Roth IRA can be withdrawn tax and penalty-free at any time.
- Clarification: The IRS distribution order for Roth IRAs is outlined, indicating that contributions can always be withdrawn without tax or penalties.
- Advice: The user is encouraged to track their contributions and the order of distributions, as Fidelity cannot provide specific tax advice, and consulting a tax professional is recommended for personalized guidance.
Here’s the full thread
I’m reading everywhere that I can withdraw contributions at any time tax free, since I have already paid taxes on it. However on the ACTIVITY tab it is labeled as EARLY DIST NO EXCEPT, does that man it will be taxed? I withdrew way less than the shown NET DEPOSIT in the Performance tab, so I shouldn’t have withdrewn any earnings.
Hey there, @Shiro. Thanks for dropping by. I can certainly share some insight here.
You are correct that annual contributions from a Roth IRA specifically can be withdrawn tax and penalty-free at any time, regardless of your age or how long your account has been open.
The IRS mandates that Roth IRA distributions follow this order:
1. Annual Contributions: Can be withdrawn anytime tax and penalty-free for any reason
2. Conversions: Can be withdrawn tax-free, though a 10% penalty may apply if withdrawn within five years of the conversion
3. Earnings: Income tax applies unless the withdrawal is qualified. There may also be a 10% penalty unless an exception applies
Please keep in mind that it is up to you to track contributions and the order of distributions. IRA withdrawals are reported in the year in which they occur, and you’ll receive a Form 1099-R from Fidelity with your distribution amount. Clients are responsible for tracking Roth IRA distributions on IRS Form 8606 to show what portion of the withdrawal is not taxable. As Fidelity cannot provide tax advice, you’ll want to speak with a tax professional if you have any questions about whether an exception applies to your specific situation and to ensure you understand the rules and requirements.
Let us know if we can help with anything else! We’ll see you around.