Apr 26

Question by The Fervor King: Should I close my Roth IRA and will I face a penalty?
My wife’s parents opened a Roth IRA for her prior to us getting married. It has been opened around six months now. We are considering closing it to pay off her credit card and getting entirely debt free. Is there any sort of exception to the additional taxing on nonqualified disbursements that would apply to this situation? We have other investments in place, and this Roth IRA is really unnecessary. Any help would be greatly appreciated. Thanks.

Best answer:

Answer by Steve D
Sorry, but unless you can show hardship, there are no exemptions and you will end up paying the 10% penalty.

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3 comments so far...

  • Smiling Said on April 26th, 2011 at 7:11 pm:

    Yes, this Roth is really unnecessary. Seriously.
    Do you even understand what a Roth is? It’s the only investment in the USA that you don’t pay income tax on the growth. That means you put in $ 1 and by retirement that $ 1 has grown to $ 2500 and $ 2499 of that is free of tax. Where as every other investment you will lose between 20-40% of it when you pull the money out.

  • Panama66 Said on April 26th, 2011 at 7:51 pm:

    As far as I understand it, you pay no penalty on funds that you put in there that you did not claim a tax deduction for. I’m not an accountant, but that’s my understanding.

  • Brianna Said on April 26th, 2011 at 8:26 pm:

    What? It grows tax free! Why would you withdraw it now to pay a 10% penalty and get taxed on the growth? Keep it until retirement and enjoy your untaxed free money!

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