How to Withdraw Money from Unused Roth IRA on E-trade - Tax Implications?

The tax implications for withdrawing from your Roth IRA depend on a few factors, primarily the age of the account and your age when withdrawing. For Roth IRAs, you can always withdraw your original contributions (what was put in) tax-free and penalty-free. That's one of the big benefits of Roth accounts. However, if you're withdrawing any earnings on those contributions and you're under 59½ years old, those earnings would typically be subject to income tax plus a 10% early withdrawal penalty. Since you mentioned the money has just been sitting there without being invested, it sounds like you might not have any earnings at all - just the original $2000 contribution. If that's the case, you should be able to withdraw the entire amount without any taxes or penalties! I'd recommend calling E-trade back and specifically asking if there have been any earnings in the account. Ask for the "basis" (original contribution amount) and the current total. If they're the same, you're likely in the clear for a penalty-free withdrawal.

After dealing with similar confusion about my Roth IRA withdrawal, I found this amazing tool called taxr.ai that saved me from potentially paying penalties I didn't actually owe. I was getting different answers from people and getting frustrated, so I uploaded my account statements to https://taxr.ai and it analyzed everything for me. The tool showed me exactly what portions of my Roth IRA were contributions vs. earnings and calculated precisely what tax implications I would face based on my specific situation. It was a huge relief to have clear answers instead of the vague "maybe 10%" type responses I was getting before.

I have to admit I was wrong about online tax tools. After being skeptical about taxr.ai in my previous comment, I decided to try it myself with my own Roth IRA questions, and I'm honestly impressed. I uploaded my statements from Vanguard, and it immediately identified that my early withdrawal would actually be penalty-free because I was only taking out contributions, not earnings. The analysis saved me from unnecessarily keeping money locked away that I could access without penalties. It even explained the specific IRS rules that applied to my situation in plain English. Definitely worth checking out if you're trying to figure out Roth IRA withdrawal penalties like the original poster.

If you're struggling to get through to E-trade or get clear answers about your Roth IRA withdrawal, try Claimyr. I was in a similar situation with Fidelity where I needed to understand some nuanced tax implications, but couldn't get past their basic customer service. With https://claimyr.com I got a callback from an actual E-trade retirement specialist within 20 minutes instead of waiting on hold forever. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c - basically they navigate the phone tree for you and get you to a real person who can actually help. The retirement specialist was able to pull up my exact contribution history and tell me precisely what I could withdraw penalty-free. Worth every penny to avoid the endless hold music and generic advice from frontline reps.

I need to eat my words from my previous comment. After ragequitting on hold with E-trade for over an hour, I broke down and tried Claimyr. Within 15 minutes I was talking to an actual human being at E-trade who could answer my specific questions about my account. The retirement specialist confirmed exactly what I needed to know about my Roth IRA distribution options. They even emailed me a breakdown of my contribution basis vs. earnings so I knew exactly what I could withdraw penalty-free. Saved me hours of frustration and probably some hair I would have pulled out.

Something important that hasn't been mentioned yet - even if you can withdraw your contributions without a penalty, you should consider if this is really your best option. Once you take money out of a Roth IRA, you can't put that specific contribution back in (beyond the normal annual contribution limits). I had to make a similar choice last year, and I ended up taking out a personal loan at 9% interest instead of touching my Roth. The long-term growth I'd be giving up was worth more than the interest I paid on the loan. Just something to consider if you have any other options.

Has anybody withdrawn from E-trade specifically? Their website is confusing me. When I go to the withdrawal section, it makes me select a reason for the distribution and none of them seem to fit "I just want my contributions back." The options are like "disability" and "education expenses" which don't apply to me.

Just wanted to add my experience as someone who went through this exact situation with E-trade last year. I had about $1,800 sitting in my Roth IRA that was never invested, and I needed the money for an emergency car repair. The key thing is to get your "contribution basis" from E-trade - this is the total amount you (or in your case, your sister) actually put into the account. If that uninvested money has been earning any interest at all (even small amounts), you'll want to know the exact breakdown. In my case, even sitting in their default money market account, I had earned about $23 over two years. I was able to withdraw my full $1,800 contribution with zero penalties or taxes, but I left the $23 earnings in the account to avoid any complications. One tip: when you call E-trade, ask specifically for your "Form 5498 information" - this will show your contribution history by year. Makes the whole process much clearer and gives you confidence you're withdrawing the right amount.

I went through a similar situation with my Roth IRA withdrawal and want to share what I learned. The most important thing is to understand that Roth IRA withdrawals follow a specific ordering - contributions come out first, then earnings. Since your money has been sitting uninvested for 6 years, you likely have minimal to no earnings. Here's what I'd recommend: Before you withdraw anything, call E-trade and ask for your exact contribution basis and current account value. If they're the same (around $2000), you can withdraw the full amount penalty-free and tax-free regardless of your age. If there are any earnings, you can still withdraw up to your contribution amount without penalties. The 10% penalty the rep mentioned only applies to earnings withdrawn before age 59½, not to your original contributions. Don't let that scare you away from accessing money that's rightfully yours without penalty. Just make sure you understand exactly what portion is contributions versus earnings before you proceed.

I just wanted to chime in as someone who works in retirement planning - you're getting some excellent advice here! The key point everyone is making about Roth IRA contribution withdrawals being penalty-free is absolutely correct. Since your money has been sitting uninvested for 6 years, you're in a relatively simple situation. When you call E-trade, make sure to ask them to break down your account into two numbers: (1) total contributions made and (2) total earnings/growth. Even if the money was in a default settlement fund, it may have earned a small amount of interest. One thing I'd add that hasn't been mentioned - when you do withdraw, E-trade will send you a 1099-R form at tax time. Don't panic when you see it shows a distribution! You'll just need to complete Form 8606 when filing your taxes to show the IRS that you withdrew contributions only (assuming that's the case). This form essentially tells the IRS "hey, this withdrawal was penalty-free because it was my own contributions coming back to me." The fact that your sister set this up 6 years ago actually works in your favor - it gives you a clear contribution history to reference. Good luck with the withdrawal!

I was in almost the exact same situation as you about two years ago! I had a Roth IRA that my parents opened for me in college with about $2,500 that had been sitting there doing nothing. When I needed the money for an emergency, I was terrified about penalties. The good news is that since your money hasn't been invested and growing, you're likely looking at a penalty-free withdrawal of your full $2,000. When I called my broker (not E-trade, but similar situation), they confirmed that my account had earned maybe $8 in interest over several years, so I could withdraw my original contributions without any penalties or taxes. Here's what I wish I had known upfront: the E-trade rep's mention of a 10% penalty is technically correct, but it only applies to *earnings* withdrawn before age 59½. Since your money has just been sitting there, you probably have little to no earnings to worry about. My advice is to call E-trade back and specifically ask: "What is my total contribution basis, and what is my current account value?" If those numbers are the same or very close, you're golden. Don't let their generic penalty warnings scare you away from accessing your own money penalty-free!

I just want to echo what everyone else is saying here - you're in a much better position than you think! As someone who recently went through a similar Roth IRA withdrawal, I can confirm that the process is pretty straightforward once you understand the rules. The key takeaway from all these great responses is that Roth IRA contributions can always be withdrawn penalty-free and tax-free, regardless of your age or how long the account has been open. The 10% penalty everyone worries about only applies to earnings/growth on those contributions. Since your $2000 has been sitting uninvested for 6 years, you're likely looking at withdrawing pure contributions with minimal to no earnings. When you call E-trade, ask them for your "contribution basis" - this is the magic number that tells you exactly how much you can withdraw penalty-free. One last tip: don't be intimidated by their withdrawal interface asking for a "reason." As someone mentioned, just select the early distribution option and let the IRS forms sort it out later. The important thing is getting access to your money when you need it, especially since it appears you can do so without any penalties. Good luck!

I'm really glad I found this thread! I've been putting off dealing with a similar situation with my own Roth IRA because I was terrified of penalties, but reading everyone's experiences here has been incredibly educational. The consistent advice about asking for your "contribution basis" versus current account value seems to be the golden rule for figuring out penalty-free withdrawals. It's amazing how many people were in nearly identical situations - money sitting uninvested for years that can be withdrawn without penalties. @Ethan Clark, based on all the great advice here, it sounds like you're likely going to be able to access most or all of your $2000 without any penalties since it's been sitting uninvested. The fact that multiple people who work in finance and have personal experience are all saying the same thing should give you confidence to move forward. Thanks to everyone who shared their real experiences rather than just speculation - this is exactly the kind of practical advice that makes this community so valuable!