At all times and at any age, you can withdraw as much as you have contributed to your Roth individual retirement account (IRA) without tax or penalty.
This series is about practically how you do that.
Contributing to a Roth IRA, even though you know you will withdraw it before retirement, is a sound financial strategy.
In a designated Roth account like a Roth 401(k), each early distribution is treated as coming part from contribution basis and part from earnings.
For those over age 59 1/2, you would need to withdraw all funds attributable to basis before your withdrawal would be sourced from Roth IRA earnings and the age of your Roth IRA would matter for taxation.
In the eyes of the IRS, Roth conversions are a type of rollover and their part in your Roth IRA’s contribution basis is called a rollover contribution.
In Publication 590B, the IRS gives an example to demonstrate how Roth distribution ordering works.
In Publication 590B, the IRS gives an example to demonstrate how Roth contribution basis works in a Roth IRA.
It is easiest to simply save your 1099-R and its numbers with your record of all your Roth IRA contributions.
Going forward, keep track of all your contributions in a file alongside where you store your tax returns.
To take advantage of tax-free penalty-free Roth withdrawals of contribution basis, you need to keep careful records of your Roth contributions.