8 Replies Latest reply on Jan 31, 2016 4:52 PM by sherylbug

    Complicated Roth Question


      Actually, it may not be that complicated but I haven't found an answer yet.


      I have a Roth IRA I started 13 years ago.  I'm old enough to take money out without penalty.  I'm good there.


      I also have another Roth IRA that I rolled over from a Roth 401k early this year when I changed jobs.  I had started the Roth 401k several years ago, but when I rolled it over the timer was reset and according to the company that is holding it I can't withdraw money without penalty until 2020.


      Now my current company is going through changes and I may wind up with another roll over situation.


      Each of the 3 accounts is with a different company.


      Not being able to access the 2nd Roth until 2020 probably isn't an issue, but as I'm coming up on the same scenario again I'm wondering if I should have done things differently.  Perhaps instead of rolling over in place I should have rolled the Roth 401k into the older Roth?  If I roll the 2nd account over now, will it make that money accessible or does it bring restrictions to the first account?


      If anybody happens to have a link to a good site about this stuff, that would be helpful.  I have googled and looked through some of the IRS site and haven't seen anything useful.  The help line at the 2nd company said that since I'm over 59.5 the 5 year period doesn't apply but I don't think that's true.


      Pointers appreciated.





        • Re: Complicated Roth Question

          Mine was a 403(b) - I am not familiar with a Roth 401(k) or any other, except Roth IRA, which originated for us when that first became a possibility. We paid a huge amount of federal income taxes spread over a four year period at the time. Our roll-over is with the same company, same specific Fund name but the two are identified as "Roth IRA" and "Rollover" so I am not clear what a "roll-over Roth" is, actually. My ignorance.

            • Re: Complicated Roth Question

              Thanks for the reply. Sounds like yours was more like a regular 401(k) rollover than a Roth 401(k) rollover.  The 403(b) is almost in all ways like the 401(k), except AFAIK there isn't a Roth 403(b).  I did a regular 403(b) rollover to a non-Roth IRA a number of years ago, and I didn't have to pay any tax.  For Roth 401(k) to Roth IRA rollover there shouldn't be any tax because they're both after-tax money.  The only question is when I can take out the money without paying tax on the earnings. 

            • Re: Complicated Roth Question

              Thank you Sheryl for asking such an educational question.  I think  you can withdraw from all 3 of your Roth IRAs whenever you want, tax and penalty free.  I arrived at this conclusion by reading a blog post at kitces.com, which I found by using Google to search on roth rollover withdrawl rules.  Basically, Michael says that once you have owned any Roth IRA for more than 5 years, and met the age requirement, all your Roth IRAs are fair game.  But this doesn't include 401K Roth IRAs that have been rolled over.  There is a special rule for those.  It is a complicated piece of tax law that I'd never read up on before.  I would urge you to not combine any of your accounts, although you could move them to a single institution.  It's much harder to figure out what the rules are when you combine accounts.  Speaking of which - that was a mistake I was planning to make.  My plan has changed, thanks to you.



              • Re: Complicated Roth Question

                If you are getting ready to roll more accounts, you might consider rolling them into Roth Annuity plans.  I have 3 annuities: 2 are traditional IRA's (403b origins) and the other is a Roth Annuity that originated in a Pension.  I can withdraw up to 10% of the funds in each Annuity every year, with out penalty.  Part of my strategy is to roll over 10% of the traditional Annuities into the Roth Annuity and hopefully lower taxes in the long run.

                If you go the annuity route, BE CAREFUL.  Not all annuities are created equal.  I have indexed annuities, 2 earning 7% /yr and 1 earning 5% /yr.

                I am not an accountant, financial planner, tax guru.  Just a schmuck who hopes to be comfortable for life.

                  • Re: Complicated Roth Question

                    Thanks for the suggestion, but I have no interest in doing that.  I'm not a big fan of annuities anyway, and this money is not intended for income so I wouldn't want to lock it in to something where I had limitation on withdrawals.  I have a large chunk of my regular 403(b) money in the "annuity" part of TIAA-CREF mostly as a conservative portion of the portfolio, and that's probably all the annuity I want.


                    As it happens, too, my recently-acquired company is not changing the retirement management company in 2016 so I don't have to make any decisions on another rollover this year after all.

                  • Re: Complicated Roth Question
                    Retired not Obsolete

                    Found this searching the IRS site. It seems to directly answer your question. As I am not a tax professional, you can make your own interpretation. Here is the URL to the quote below.  Hope it helps!



                    "How is the 5-taxable-year period calculated when I roll over a distribution from a designated Roth account to a Roth IRA?

                    When you roll over a distribution from a designated Roth account to a Roth IRA, the period that the rolled-over funds were in the designated Roth account does not count toward the 5-taxable-year period for determining qualified distributions from the Roth IRA. However, if you had contributed to any Roth IRA in a prior year, the 5-taxable-year period for determining qualified distributions from a Roth IRA is measured from the earlier contribution. So, if the earlier contribution was made more than 5 years ago and you are over 59 ½ a distribution of amounts attributable to a rollover contribution from a designated Roth account would be a qualified distribution from the Roth IRA."