Thank you for challenging me on this
@mongo.
Some searching and yes, I think that came from the moneycrashers site. I've always believed that ROTH withdrawals via SEPP were were not taxed.
Looking for more info led me here:
All Roth IRA distributions are not taxed if you wait until you're 59 1/2. Before that age, you can withdraw your Roth IRA contributions tax-free, but earnings will be taxed.
www.thebalance.com
I looked at the IRS stuff and I didn't find that clear on this very specific point. The Morgan Stanley stuff also looks ambiguous to me on this point:
I read this as:
1) yes you can take distributions
2) the contributions can be withdrawn penalty and income tax free (In my case, I don't care - the original contributions are trivial)
3) The money line that could have made this clear -- 'only be used for a Roth .. want to withdraw earnings after exhausting contributions'.
They -could- have said what when earnings were distributed via SEPP they would be income tax free.
From the IRS Pub:
This seems to be the full list of qualified distributions (for earnings).
My takeaway - I'm not a tax pro. NOT-ADVICE.
I've always thought that the ROTH withdrawals via SEPP would be income tax free but now I'm unsure. If one has $10k worth of contributions in a $1M account, then the ability to withdraw the $10k with no penalty or income tax owed is kind of trivial. I'll find a tax pro to clear this up before I start a SEPP from my Roth IRA.