topic Tracking original date on rolled RothIRA in After you file

Tracking original date on rolled RothIRA

paisleywoodstock — Sat, 01 Jun 2019 01:45:05 GMT

I was still employed when I opened and started contributing to a roth IRA in 2011. When I retired in 2016 I rolled it over to similar product in Fidelity. I'm assuming this satisfies the 5-year age requirement for owning a roth ira so if I liquidate it anytime after today I will not be liable for paying tax on it. am I right in my assumption? how is the original date kept track of from one institution to another?

You do not need the original date just the original year....

Critter — Sat, 01 Jun 2019 01:45:07 GMT

You do not need the original date just the original year... for instance if you started the ROTH anytime in 2011 then that is year 1. So any distributions starting 1/1/16 satisfies the 5 year rule.

Too, you can ALWAYS take out original contributions at an...

TomYoung — Sat, 01 Jun 2019 01:45:09 GMT

Too, you can ALWAYS take out original contributions at any time. The 5 year rule applies only to earnings. The default ordering of distributions starts with original contributions so you actually could have taken distributions any time after opening the IRA, up to the amount of original contribution.

Since you mentioned rolling over the account when you ret...

dmertz — Sat, 01 Jun 2019 01:45:09 GMT

Since you mentioned rolling over the account when you retired, I'm wondering if the account that you began contributing to in 2011 was actually a Roth IRA or was instead a Designated Roth Account in a 401(k) or similar plan. As long as the account you contributed to was a Roth IRA, you've met the 5-year year rule with regard to determining whether or not a distribution from a Roth IRA is a qualified distribution.

If it has been more than 5 years since the beginning of the year for which you first made a Roth IRA contribution, as long and you are age 59½ or older when you make a distribution from the IRA, your distribution is a qualified distribution, tax and penalty free. Qualified distributions are not reported on Form 8606, they only appear on Form 1040 line 15a or Form 1040A line 11a.

It's your responsibility to keep track of the year for which you first made a Roth IRA contribution. Financial institutions only track the establishment date of the particular account opened at their institution. The first Form 5498 issued by the custodian for any of the Roth IRA accounts that you ever had is your proof of the year for which you first established a Roth IRA. Since financial institutions only track the establishment date of their own accounts, if you are over age 59½ at the time of the distribution they'll use code T on the Form 1099-R for any distributions from an account that has been open with them for less than the required 5 years (and some financial institutions continue to use code T even when they know that you've met the 5-year requirement).

thank you for your answer, dmertz! still a little perplex...

paisleywoodstock — Sat, 01 Jun 2019 01:45:10 GMT

thank you for your answer, dmertz! still a little perplexed with part of your answer:. BTW I am 62 yrs old. You said it is tax & penalty free, but if I report it on 1040 line 15a it gets added to taxable income? 15a is defined as IRA distribution.

Well, something's wrong here. Please disclose the Box 1...

TomYoung — Sat, 01 Jun 2019 01:45:12 GMT

Well, something's wrong here. Please disclose the Box 1 and 2a amounts, what boxes on the 1099-R are checked, and the Box 7 codes.

Line 15a shows the total of the gross distributions, not...

dmertz — Sat, 01 Jun 2019 01:45:13 GMT

Line 15a shows the total of the gross distributions, not the taxable amount. The taxable amount appears on line 15b. If none of this distribution is included in the amount on line 15b, you are not being taxed on the distribution. Since you are age 62, no early distribution penalty should appear on line 59.

Thank you dmertz and Tom!

paisleywoodstock — Sat, 01 Jun 2019 01:45:15 GMT

Thank you dmertz and Tom!