roth withdrawal after 65

Forum|Forum|1 year ago
February 6, 2025
2 replies
31 views

Hi I've never posted before, but hoping someone can answer this question. I had a roth 401k (for 5 years) that I transferred to Vanguard and then shortly thereafter I withdrew it to purchase a house. I still have two other roth accounts at Vanguard that I have had for at least 10 years. I am over 55 and was over 55 at the time of the Roth ira withdrawal. Vanguard's 1099 says taxable amount not determined. Turbo tax is making me do calculations as to all of the roth contributions that I have ever made that are still not distributed. Does this sound right? To figure that out I will have to go back almost 30 years. I know what amounts are currently remaining in my roths, just not how much of those is from contributions. I think this exercise should only be relevant if I was under 55. Anyone know the answer? Thank you.

DavidD66

Level 15

it is true you must wait at least five years from the start of the tax year of your first Roth IRA contribution before withdrawing earnings. If you withdraw earnings before the five-year rule is met, it's considered a non-qualified distribution and may be subject to taxes and penalties. Since you have had a Roth IRA more than five years, your distribution is qualified. The Distribution Code in Box 7 of your Form 1099-R should be "Q" - Qualified distribution from a Roth IRA. If that's the case then you need to enter zero "0.00" in the taxable amount. That should resolve the issue.

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dmertz

Level 15

I assume that when you say that you had the Roth 401(k) transferred to Vanguard that you mean that you rolled the Roth 401(k) over to a Roth IRA. The fact that the Form 1099-R has box 2b Taxable amount not determined marked and TurboTax is asking for the amount of your contributions that the form is reporting a distribution from a Roth IRA, not from a Roth 401(k). A distribution from a Roth IRA would have code J, T or Q in box 7 of the Form 1099-R.

The holding period for the Roth 401(k) does not transfer to your Roth IRAs. If you never had any Roth IRA prior to rolling over the Roth 401(k), your holding period for Roth IRAs began on January 1 of the year that the Roth IRA received the rollover.

If you were under age 59½ at the time of the rollover, your contribution basis in the Roth 401(k) became contribution basis in your Roth IRAs. The (likely code-H) Form 1099-R that reported this rollover should have shown your contribution basis in box 5. Otherwise, being over age 59½ and having had the 401(k) for more than 5 years, the entire amount rolled over to the Roth IRA became contribution basis in your Roth IRAs.

If your distributions from your Roth IRAs are not qualified distributions due to either not having completed the 5-year period for Roth IRAs or you were under age 59½ at the time of the distribution, that distribution must be reported on Form 8606 Part III where your Roth IRA contribution basis will be taken into account in determining the taxable amount of your Roth IRA distribution. However, if you were under age 59½ at the time of the rollover to a Roth IRA and you are now age 65, it appears that you've met the requirements for qualified distributions and your Roth IRA distributions are not reportable on Form 8606.

There is no age-55 threshold involved in any of this. The age threshold as part of the determination whether a Roth IRA distribution is qualified is age 59½.

You mention having to go back 30 years (actually no more than 26 years prior to 2024 since no type of Roth account existed before 1998), but that only applies to contributions that you made to a Roth IRA.