A 35 -year-old freelance worker contributes $⁢4,000 annually to a Roth IRA. They decide to withdraw $⁢3,000 for a vacation. What are the taxes and penalties on this withdrawal?

Roth IRA withdrawals are generally taken from contributions before investment earnings. Since the worker has contributed $4,000 and withdraws only $3,000, the withdrawal comes from contributions and is tax-free and penalty-free. The correct choice is “no penalties or taxes.”

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