Question

Mary establishes a Roth IRA at age 50 and contributes the maximum amount per year to the Roth IRA for 15 years. The account is now worth $199,000, consisting of $75,000 in contributions plus $124,000 in accumulated earnings. How much can Mary withdraw tax-free?

a. $0
b. $75,000
c. $124,000
d. $199,000
e. None of the above

Answer 1

Mary can withdraw the entire $199,000 tax-free from her Roth IRA since contributions and earnings in a Roth IRA grow tax-free and can be withdrawn tax-free, given the account has been open for over five years and she is over 59 and a half years old.

Step-by-step explanation:

Mary can withdraw $199,000 tax-free from her Roth IRA. The reason for this is that Roth IRAs offer tax-free growth and tax-free withdrawals, provided certain conditions are met. Since Mary has contributed for more than five years and is over the age of 59 and a half, both her contributions and accumulated earnings can be withdrawn tax-free.

Roth IRAs allow you to contribute after-tax income and then owe no tax at all on your earnings as they accumulate or when you withdraw them, assuming you follow the rules for a qualified distribution. There are no required minimum distributions for Roth IRAs as there are with traditional IRAs.