i) Roth IRA owners can withdraw up to the total value of their contributions at any point in time, without having to pay the 10% early withdrawal penalty or any federal income taxes.

ii) Upto $10,000 can be withdrawn without any penalty if the owner wishes to purchase a home or principal residence. The home must be purchased by either the Roth IRA owner, his spouse, ancestors or descendants. Also, the Roth IRA owner must not have previously owned a home for atleast 24 months.

iii) If a Roth IRA owner dies and his spouse also owns a separate Roth IRA, the spouse is permitted to combine the two Roth IRAs into 1 single account without any penalties or fines.

iv) The Roth IRA does not force distributions upon the owner reaching 70 and 1/2 years of age. This is unlike all tax-deferred retirement plans including the Roth 401k where the owner is required to take minimum required distributions (MRDs) after the age of 70 and 1/2 years. Usually all distributions must be withdrawn by April 1st of the calender year. Source: http://www.401klookup.com

It doesn’t matter how educated you are because it’s just a matter of getting all the relevant information in one easy to find place, unfortunately the people writing those information docs aren’t the ones who have to use it so they don’t really think the way “regular” people think.

The other confusing thing is that Roth 401ks have different rules than Roth IRAs when it comes to withdrawals, which can also be confusing too and a lot of people just assume Roth 401ks are just like Roth IRAs except for 401ks. It’s just not that simple and you wouldn’t know unless you read up on it.

If you ever have any questions, feel free to email me!

My husband’s employer began offering a Roth 401k last year which complicated things and we weren’t sure how to take advantage of it (although we have all along both of us been funding our 401ks very consistently).

And, because we weren’t eligible for a Roth IRA until this last year we never thought about Roth anything.

I assumed the Roth 401ks were the same limit as the Roth IRAs ($4k).

I consider myself a halfway educated person wrt personal finance; it I got so confused and befuddled by this, how is the person who doesn’t think much about personal finance ever supposed to figure it out?