Roth IRA Withdrawal Questions

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cheese_breath
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Roth IRA Withdrawal Questions

Post by cheese_breath »

Age: Very much over 59
Last Roth Conversion: 2015
Roth was totally funded through Roth conversions of tIRAs. No personal contributions.

Looking ahead to how I pay DW’s medical expenses, I might want to begin withdrawing from my Roth IRA in the next 2-3 years. With your permission, I’d like to pose a couple questions to make sure I have all my ducks in a row before that time.

(1) Since DW’s stroke I’ve been using the excess medical deductions to cover tax-free withdrawals from my tIRA, and depositing them into our Ally Bank trust account for use in paying the next year’s expenses. This year I’m thinking of converting them to my TIAA Roth Traditional where they will earn 1% guaranteed instead of what Ally is paying. I know the Roth withdrawal order is contributions first, then conversions, and then interest. If I add this new conversion to the existing Roth it’s possible I might need to withdraw it before five years, thereby incurring a penalty. I know the most obvious solution is simply to open another Roth for it, but I’m wondering if there is anything else. (I did see a sentence in an Investopedia article that says the IRS allows an exception to the five-year rule if the withdrawal is to reimburse myself for medical expenses that exceed 10% of my AGI. Does this complicate income tax preparation? Could TurboTax handle it?)

(2) I thought I read somewhere (which I can’t find now) the custodian is responsible for keeping track of which withdrawals are contributions, conversions and earnings. I moved my VG Roth to my TIAA Roth by direct transfer in 2017, and I don’t know if Vanguard sent that information along with it. I’ve kept records of all my conversions, but I don’t know what TIAA has. What do I do when I begin making withdrawals?

I really don’t need to know this for a while, but I hate last minute surprises because I waited too long to ask.
The surest way to know the future is when it becomes the past.
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David Jay
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Re: Roth IRA Withdrawal Questions

Post by David Jay »

cheese_breath wrote: Sat Sep 26, 2020 1:35 pmI know the Roth withdrawal order is contributions first, then conversions, and then interest. If I add this new conversion to the existing Roth it’s possible I might need to withdraw it before five years, thereby incurring a penalty.
All your withdrawals are now qualified. For you, there are no longer any rules or clocks. So you don't need to worry about any of that "stuff".

Do as many conversions as you wish. Withdraw it whenever you want.

[edit] For those not familiar with the rules, all Roth distributions are qualified when both of these are true:
1. You are over age 59.5
2. Your first (first ever, even if later closed) Roth IRA account was opened 5 or more years ago.
Last edited by David Jay on Sat Sep 26, 2020 2:12 pm, edited 1 time in total.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
terran
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Re: Roth IRA Withdrawal Questions

Post by terran »

You're over 59.5 and you've had a Roth IRA (any Roth IRA, they're all counted together) open for at least 5 years, so anything you have in a Roth IRA can be taken out at anytime tax and penalty free. Anything you convert from traditional to Roth in the future can also be taken out at anytime.
retiredjg
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Re: Roth IRA Withdrawal Questions

Post by retiredjg »

Your Roth IRA is qualified now. That means that all withdrawals are tax and penalty free. You can take every last penny if you want. And you don't even have to report it on a Form 8606 (because the withdrawals are qualified).

For a Roth IRA to be "qualified" you have to meet two requirements.

1. Be over age 59.5.

2. Have made your first Roth IRA contribution at least 5 tax years ago. This requirement has been met because your last Roth conversion was in 2015 and the clock ran out on that contribution at the end of 2019.


Just FYI, you - not your custodian - are responsible for keeping track. But now that those two requirements are met, none of that matters any more.

Good luck :happy
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cheese_breath
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Re: Roth IRA Withdrawal Questions

Post by cheese_breath »

Thank you David and terran. Makes my life a little easier.

edit: And retiredjg
The surest way to know the future is when it becomes the past.
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David Jay
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Re: Roth IRA Withdrawal Questions

Post by David Jay »

easy is good
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
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