Why is my Roth IRA Cost Basis So Much Higher than my Contributions?

[bhuether]

I just noticed that Schwab shows my Roth IRA Cost Basis as $85,000.  Primerica shows $56,000.  The thing is, these accounts started around 2000, and I was always contributing yearly, between the two accounts, such that I was making the maximum yearly contribution, and no more.  To have a combined Cost Basis across these accounts of nearly $140,000, that would suggest I have been contributing for well over 20 years. But that is not the case. So I can't make any sense of these reported figures on the schwab and primerica sites...

[ThomasM125]

If you contributed $5,000 a year for twenty years at 4% compound interest, the balance would be about $140,000 after twenty years. You said you started in 2000, so that would make twenty years by now, so the cost basis amount seems reasonable.

[bhuether]

The thing is the total value across both accounts is around $300K.  $140 is shown as cost basis. So anything gained by interest is part of earnings and I can't imagine why it would show up in cost basis. In looking at one of the accounts I see a lot of dividends reinvestments, but again I don't see how that is considered cost basis, because the dividends are earnings. I almost get the sense that these companies are being encouraged by the IRS to incorrectly report cost basis so that people like me might have an initial thought of "Oh look, I can withdraw that amount penalty free!", and then the IRS gets a benefit. Maybe they are regretting how beneficial a Roth IRA is to the client and trying to find ways to bring about penalties. Otherwise it is really tough for me to figure out why both schwab and primerica, on their websites, don't display my total contribution. They display a ton of other information, just not the single piece of information that is most important to me for figuring out what I can withdraw penalty free... Quite odd really.

[DaveF1006]

it depends. if you have reinvested dividends, these get added into the cost basis. According to irs.gov, "you should keep records of the amount of the reinvested dividends, the number of additional shares purchased and the purchase dates. You'll need this information to establish your basis when you sell the shares. "

Although the IRS does not say this specifically, many companies will add reinvested dividends to your cost basis than pay you directly for the dividend. One advantage of this is the fact your capital gains will be less because of the increased cost basis in your account. 

[Critter-3]

Total contributions made to the account  and  the cost basis or value of the account are NOT the same thing.   If you take an early distribution from the ROTH you can tax free up to the amount of your contributions.  If you did not keep all the form 5498 the brokers sent you all these years and/or the broker didn't keep the records then you will need to figure this out yourself.