How to withdraw funds from my dormant Roth IRA on E-Trade - tax implications?

The tax implications for Roth IRA withdrawals depend on a few factors. Let me break this down for you in simple terms. For Roth IRAs, you can always withdraw your original contributions (the money that was put in) tax-free and penalty-free at any time. That's one of the big benefits of Roth accounts. However, if you're withdrawing any earnings (growth on the original contributions), and you're under 59½ years old or the account is less than 5 years old, you'll typically face taxes and a 10% early withdrawal penalty on those earnings. 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 taxes or penalties. To be certain, you should check your E-Trade statements to confirm if the current balance is just from contributions or if there's any interest or growth included.

I had to deal with this exact situation last year! After getting the runaround from my broker, I found this service called taxr.ai (https://taxr.ai) that really helped me figure out my Roth IRA withdrawal situation. I uploaded my statements and it showed me exactly what portion was contributions vs earnings, so I knew exactly what I could take out penalty-free. The tool also showed me some exceptions to the 10% penalty I didn't know about - like if you're using the money for a first-time home purchase (up to $10k), education expenses, or if you have significant medical costs. Saved me from making a costly mistake with my withdrawal strategy.

Just wanted to follow up about my experience with taxr.ai after trying it out. I was skeptical at first (as you saw in my comment), but it actually worked really well for my situation. I uploaded my last E-Trade statement and it separated everything into contributions and earnings within minutes. Turns out I had about $200 in earnings I didn't know about, so I was able to just withdraw my contribution amount without any penalties. The tool also generated a PDF explaining exactly how the calculation was done that I can keep for my records in case of an audit. Definitely saved me from potentially paying unnecessary penalties!

If you're struggling to get clear answers from E-Trade, I highly recommend using Claimyr (https://claimyr.com). I was in a similar situation with my old Roth IRA and couldn't get a straight answer about withdrawal penalties. I used Claimyr to connect with an actual IRS agent (without waiting on hold for hours), and they explained exactly how the Roth IRA withdrawal rules applied to my situation. They have a great video showing how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed that contribution withdrawals are always tax and penalty free. They also explained some exceptions to the early withdrawal penalties I didn't know about, like using the money for qualifying education expenses or first-time home purchases. Changed my whole approach to accessing my retirement funds!

I need to eat my words and follow up about Claimyr. After commenting earlier, I decided to try it since I've been trying to reach the IRS about my own retirement account issues for weeks. It actually worked exactly as described. I got a call back in about 45 minutes (they estimated an hour), and was connected to an IRS representative who answered all my questions about Roth IRA withdrawals. The agent confirmed that I could withdraw my contributions without penalties and walked me through how to report it correctly on my tax return. What would have been hours of frustration trying to reach someone turned into a single 20-minute phone call. Definitely worth it for specialized tax questions like this.

Just wanted to add that it's super important to check if your state has additional taxes or penalties for early retirement withdrawals. The federal rules about Roth contribution withdrawals being tax-free are consistent nationwide, but some states have their own penalties or don't follow the federal treatment. California, for example, has some different rules than the IRS for certain types of retirement distributions. Worth checking if you live in a state with complex tax laws.

Has anyone used E-Trade's withdrawal process recently? How long did it take to get your money? I'm considering taking funds from my Roth IRA too but need the money pretty urgently.

I went through this exact situation with my E-Trade Roth IRA about 6 months ago. Here's what I learned that might help you: First, the good news - since your account has been sitting there without investments, you likely have little to no earnings. As others mentioned, you can withdraw your original contributions penalty-free and tax-free at any time from a Roth IRA. To find out exactly what's contributions vs. earnings, log into your E-Trade account and look for "Account History" or "Tax Documents." You can also call them and ask specifically for your "Form 5498" information, which shows your contribution history. One thing that surprised me - even small amounts of interest from uninvested cash can count as "earnings." My $1,800 sitting in the settlement fund for years had earned about $15 in interest, which would have been subject to penalties if I withdrew it. The withdrawal process itself was straightforward once I knew my numbers. I was able to withdraw just my contribution amount online, and the money hit my bank account in 2 business days. E-Trade automatically generates the tax forms you'll need (Form 1099-R) at year-end. Since you're in Texas, you won't have state tax complications to worry about. Just make sure you only withdraw the contribution amount to avoid any federal penalties on earnings.