Roth IRA distributions w/o penalty?

What is the name of your state? Ohio

I am young (24) and want to start saving for my retirement. I have heard that you can take distributions from a Roth IRA up to the amount of you contributions with out penalty. I have found information online that both agrees with this and disagrees with it. I would like to know if any one has any insight on this topic, and if they do is there a reference they could point me too. I cant seem to find anything on the IRS website. At least as far as I can understand there will be no tax implications since you have already paid tax on contributions to a Roth, but it is the 10% penalty that I am concerned with.

Regular contributions to a Roth IRA can be withdrawn at any time without any further tax or penalty. See http://www.irs.gov/publications/p590/ch02.html#d0e10379 and then scroll down to Ordering Rules for Distributions, and Aggregation (grouping and adding) rules.

If you want to undo a contribution for the current tax year you can withdraw the contribution and any gains on that money only, without penalty (although, you would be taxed on the gain), and it would be like the contribution never happened. And you can withdraw the total of previous year contributions (but not gains, unless old enough to be qualified) without any tax or penalty.

So if you do not have enough money to fully build up an emergency fund yet, it makes sense to use the Roth IRA as part of your emergency fund, because in a pinch, you could pull out any contributions without penalty. All though you should avoid that if at all possible to let that money grow tax free.

Note that there is an annual contribution limit for the sum total of any or all IRA's. But that is independent from the limits for an employer sponsored retirement plan [401(k), 403(b) etc.]. So while your income and tax rate is lower than it is likely to be in the future, you should try to fund the Roth as much as possible, while contributing at least enough to any employer plan to get any matching funds.

Also note that up to $10,000 that might otherwise be subject to 10% penalty is exempt from that penalty if used to buy, build, or rebuild your first home. Although, it may still be subject to tax if unqualified gains.