Using a Roth IRA to pay health insurance

L1: Using a Roth IRA to pay health insurance
I have a Roth IRA for over 10 years can I use that money to pay for health insurance without being penalized the 10% for early withdrawal? I am 53 years old. I want to add that I just started taking 72t distributions from a traditional IRA. I have been out
of work for a long time and would hate to lose my health care insurance.
2012-01-10 17:53, By: kane, IP: [207.237.214.217]

L2: Using a Roth IRA to pay health insurance
I think that you are mixing 2 different aspects of the tax code, unless your ROTH IRA is in your SEPP 72-T IRA universe for some reason.
1. You can take distributions of your CONTRIBUTIONS/CONVERSIONS to a ROTH IRA at any time without any tax or 10% penalty.
2. Once you have withdrawn all of your Contributions/Conversions, then you are into the “earnings phase”, and are subject to tax, and possibly penalty, before 59 1/2.
3. Traditional IRAs have a separate exclusion from the 10% penalty for early distributions.
4. There is some uncertainty if # 3 applies to SEPP 72-T plans. I think that it can be used in addition to the SEPP 72-T withdrawals.
2012-01-10 18:56, By: dlzallestaxes, IP: [96.227.217.194]

L3: Using a Roth IRA to pay health insurance
The money I used for the 72t distribution is from a traditional IRA that is completly separate from the Roth IRA I want to use to pay for my health insurance. So you are saying that I can use the money from my Roth IRA, as long as they are the contributions
to pay bills and health insurance without any penalty?
So it is possible that I can use the money from the traditional IRA that I used to start the 72t distribution to pay for health insurance even though I already took my distribution for the year, without touching my Roth IRA?
2012-01-10 19:14, By: kane, IP: [207.237.214.217]

L4: Using a Roth IRA to pay health insurance
Since your Roth IRA is not yet qualified, distributions must follow the “ordering rules”. Under these rules, the first money out comes from your REGULAR Roth contribution balance. These are tax and penalty free. Next comes your
Roth conversions starting with the oldest. Once you hit conversions that are not 5 years old, the distribution is not taxed but IS subject to the penalty of 10% on the part of the conversion that was taxable when it was converted. Last out are the earnings
and they are subject to both tax and penalty.
If your medical costs including health insurance exceed 7.5% of your AGI, any of the above portions of distributions that would be penalized would avoid that penalty up to the amount of qualifying medical expenses.
Now if you can afford it, you can certainly use the 72t distributions from your TIRA to pay the premiums as well and you would not have to touch the Roth. You cannot take extra distributions from the TIRA, but whether you tap
the Roth to pay the premiums would probably be based on whether the 72t plan limit that you will have until the plan ends is enough to pay for the health insurance or not.

2012-01-10 20:21, By: Alan S., IP: [24.116.66.40]

L5: Using a Roth IRA to pay health insurance
I believe that there is untested uncertainty since the applicable case was poorly worded as to whether or not all other exceptions can be used in addition to the SEPP exception in allowing distributions in excess of, or in addition to, the annual SEPP distribution
amount. If allowed, this would include Education, Health Insurance, Medical Expenses, etc with their applicable limitations or thresholds.
2012-01-11 05:35, By: dlzallestaxes, IP: [96.227.217.194]

L6: Using a Roth IRA to pay health insurance
dlz,
I agree, as I think you are referring to the Benz case.
However, his question involves his Roth IRA which I took to be totally outside his SEPP plan with his TIRA. His question is about the penalty waivers on distributions from his Roth IRA.
2012-01-12 01:28, By: Alan S., IP: [24.116.66.40]

L7: Using a Roth IRA to pay health insurance
Yes. I was trying to get him to understand that he might be able to take the distribution for his health insurance from either plan. Of course, he should look at the tax consequences based upon his tax situation.
The distribution from the Traditional IRA would be taxable, and the health insurance would be included with his other medical insurance, subject to the 7.5% of AGI threshold, unless he is self-employed. On the other hand, if he qualifies, the distribution
from the ROTH would be tax free, and he would have a medical deduction. But he would give up that investment which would generate tax-free income and growth for his lifetime, his spouse’s, his children’s, and his grandchildren’s.

2012-01-12 04:53, By: dlzallestaxes, IP: [96.227.217.194]