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Calculating Roth IRA Basis
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Bill Woessner
Nov 30, 2015, 2:50:04 PM11/30/15
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This is a followup to a question I asked back in June. My Roth IRA contains regular contributions as well as conversions from both deductible and non-deductible IRA contributions. I have not tracked the basis over the years, but I believe I have all the requisite paperwork (specifically forms 5498 and 8606). Is there a simple procedure/algorithm for computing my basis today? It seems relatively straightforward, but I just want to make sure I'm avoiding all the pitfalls.
Thanks,
Bill
Thanks,
Bill
Rich Carreiro
Dec 1, 2015, 3:00:04 PM12/1/15
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Roth IRA basis is the sum of the full amounts of every regular Roth
contribution and conversion contribution you've ever made.
--
Rich Carreiro rlc-...@rlcarr.com
Bill Woessner
Dec 9, 2015, 2:50:04 PM12/9/15
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On Tuesday, December 1, 2015 at 3:00:04 PM UTC-5, Rich Carreiro wrote:
> It's very easy. Assuming you've never taken a Roth distribution, your
> Roth IRA basis is the sum of the full amounts of every regular Roth
> contribution and conversion contribution you've ever made.
I should be more specific about what I'm trying to figure out. I want to know how much money I could withdraw from my Roth IRA tax- and penalty-free (right now). I know I have to worry about the 5-year rule for conversions. But does the 5-year rule apply to non-deductible traditional IRA contributions, as well as deductible ones (including 401k rollovers)? Consider the following scenario, which I do every year:
> It's very easy. Assuming you've never taken a Roth distribution, your
> Roth IRA basis is the sum of the full amounts of every regular Roth
> contribution and conversion contribution you've ever made.
My traditional IRA balance is $0. I contribute $5,500 to my traditional IRA. I immediately convert that traditional IRA to a Roth IRA. Could I then withdraw that money tax- and penalty-free? It seems like I should be able to, but I can't really find any documentation one way or the other. With the elimination of the income limit for Roth conversion, it seems like this would be a more and more common occurrence.
Thanks,
Bill
Rich Carreiro
Dec 10, 2015, 10:50:07 AM12/10/15
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Bill Woessner <woes...@gmail.com> writes:
>On Tuesday, December 1, 2015 at 3:00:04 PM UTC-5, Rich Carreiro wrote:
>> It's very easy. Assuming you've never taken a Roth distribution, your
>> Roth IRA basis is the sum of the full amounts of every regular Roth
>> contribution and conversion contribution you've ever made.
>
>I should be more specific about what I'm trying to figure out. I want to know how much money I could withdraw from my Roth IRA tax- and penalty-free (right now). I know I have to worry about the 5-year rule for conversions. But does the 5-year rule apply to non-deductible traditional IRA contributions, as well as deductible ones (including 401k rollovers)? Consider the following scenario, which I do every year:
>
All contributions and conversions always come out income-tax free.
>On Tuesday, December 1, 2015 at 3:00:04 PM UTC-5, Rich Carreiro wrote:
>> It's very easy. Assuming you've never taken a Roth distribution, your
>> Roth IRA basis is the sum of the full amounts of every regular Roth
>> contribution and conversion contribution you've ever made.
>
>I should be more specific about what I'm trying to figure out. I want to know how much money I could withdraw from my Roth IRA tax- and penalty-free (right now). I know I have to worry about the 5-year rule for conversions. But does the 5-year rule apply to non-deductible traditional IRA contributions, as well as deductible ones (including 401k rollovers)? Consider the following scenario, which I do every year:
>
All contributions always come out penalty-free.
The 5-year clock on a conversion only matters to the extent the
conversion was taxable. Or put another way, the pre-5-year penalty only
applies to the extent there would have been a penalty on the trad IRA
distribution if you hadn't converted it.
--
Rich Carreiro rlc-...@rlcarr.com
David S. Meyers, CFP(R)
Dec 22, 2015, 1:50:10 PM12/22/15
to
On Wednesday, December 9, 2015 at 11:50:04 AM UTC-8, Bill Woessner wrote:
> I should be more specific about what I'm trying to figure out. I want to know how much money I could withdraw from my Roth IRA tax- and penalty-free (right now). I know I have to worry about the 5-year rule for conversions. But does the 5-year rule apply to non-deductible traditional IRA contributions, as well as deductible ones (including 401k rollovers)?
The 5 year rule applies to conversion -- including those which are the result of non-deductible traditional contributions which were then /converted/.
> I should be more specific about what I'm trying to figure out. I want to know how much money I could withdraw from my Roth IRA tax- and penalty-free (right now). I know I have to worry about the 5-year rule for conversions. But does the 5-year rule apply to non-deductible traditional IRA contributions, as well as deductible ones (including 401k rollovers)?
> Consider the following scenario, which I do every year:
>
> My traditional IRA balance is $0. I contribute $5,500 to my traditional IRA. I immediately convert that traditional IRA to a Roth IRA. Could I then withdraw that money tax- and penalty-free?
Similarly, (again, as Rich noted), had you made the $5500 non-deductible traditional IRA contribution and then immediately withdrew it (okay, ignoring "recharacterization") -- then, again, no penalties or taxes apply because you, effectively, pulled out only "after-tax" money.
> It seems like I should be able to, but I can't really find any documentation one way or the other. With the elimination of the income limit for Roth conversion, it seems like this would be a more and more common occurrence.
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