How long to keep IRA records?

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RudyS
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How long to keep IRA records?

Post by RudyS » Sun Aug 13, 2017 11:07 am

I've looked in IRS Pub 552, and searched BH. But I'm still unsure about throwing away records from IRAs dating back 25 years. Several transfers from one custodian to another. NO after-tax contributions, hence no 8606's. Since any distributions are now taxable, what can I lose by not keeping these ancient records? Trying to downsize prior to moving.

UPDATE: There are some state-specific issues to watch out for, described in a couple of the replies.
Last edited by RudyS on Mon Aug 14, 2017 3:05 pm, edited 1 time in total.

Church Lady
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Re: How long to keep IRA records?

Post by Church Lady » Sun Aug 13, 2017 11:49 am

I am a lay(wo)man, not a tax expert. My advice is free, but it may be worth what you paid for it. :oops:

As long as you keep a filing copy of your tax forms for those years (to establish no tax deductions were taken), you shouldn't need the account statements for tax purposes. I have heard elsewhere that you should *never* dispose of filing copies of your tax forms, but you can dispose of supporting documentation after a number of years.

Every couple of years I get a mass mailing asking me to participate in a class action suit pertaining to some company's management misleading investors. It happens! If your holdings are substantial, perhaps you want to participate. In that case, you'll have to document that you held a certain security during a certain time period, and account statements can be used for that purpose.

I got a settlement against a mutual fund (screwing retail customers in favor of institutional customers), so any holding in your account is a candidate.

On a personal note, I have thought of digitizing some old account statements, but haven't actually done it. If I did, I'd make a copy on two different devices and access them periodically to make sure the media hadn't deteriorated. Might this be an acceptable solution? You might want to post a specific question about digitizing old documents if you consider that route.
He that loveth silver shall not be satisfied with silver; nor he that loveth abundance with increase: this is also vanity. Ecclesiastes 1:8

tibbitts
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Re: How long to keep IRA records?

Post by tibbitts » Sun Aug 13, 2017 12:03 pm

RudyS wrote:
Sun Aug 13, 2017 11:07 am
I've looked in IRS Pub 552, and searched BH. But I'm still unsure about throwing away records from IRAs dating back 25 years. Several transfers from one custodian to another. NO after-tax contributions, hence no 8606's. Since any distributions are now taxable, what can I lose by not keeping these ancient records? Trying to downsize prior to moving.
I'm not an expert but if it turns out well all need 25-year-old records you'll be almost the only one who has them. Records retention back then wasn't what it is today with pdf files, scanning, etc. You might consider scanning them if in doubt, but to me that would depend on the number of pages. I'd scan a few dozen pages but not thousands (at least not without very serious scanning capability.)

mouses
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Re: How long to keep IRA records?

Post by mouses » Sun Aug 13, 2017 12:06 pm

You have to keep IRA records "forever." I have a cardboard box full of unorganized probably incomplete IRA records that would be nearly impossible to sort through, since I moved accounts, combined them, etc. for decades. I have probably perfect records for my other tax stuff, but I didn't realize years ago that the IRS has no limit on how long IRA stuff has to be kept. I dunno why I am keeping it, because it is such a mess that I doubt I could prove much to them if they said I had to. I would love to shred the whole mess.

I have, however, kept all my 8606s and indeed all my actual tax returns.
Last edited by mouses on Sun Aug 13, 2017 12:07 pm, edited 1 time in total.

Geologist
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Re: How long to keep IRA records?

Post by Geologist » Sun Aug 13, 2017 12:07 pm

It would probably be a good idea to keep all the Form 5498's that custodians sent you. My guess is that other records from them are superfluous.

mouses
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Re: How long to keep IRA records?

Post by mouses » Sun Aug 13, 2017 12:10 pm

RudyS wrote:
Sun Aug 13, 2017 11:07 am
I've looked in IRS Pub 552, and searched BH. But I'm still unsure about throwing away records from IRAs dating back 25 years. Several transfers from one custodian to another. NO after-tax contributions, hence no 8606's. Since any distributions are now taxable, what can I lose by not keeping these ancient records? Trying to downsize prior to moving.
My concern is if they ask me to prove that the contributions to the IRA accounts were correct.

retiredjg
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Re: How long to keep IRA records?

Post by retiredjg » Sun Aug 13, 2017 12:13 pm

I'm not sure there is anything worth documenting over the years in an ordinary IRA that contains only pre-tax money. All that money is treated the same - it gets taxed at your marginal rate on withdrawal.

For Roth IRA, it is a different story if you are not yet 59.5 and it has been less than 5 tax years since your first contribution to Roth IRA.

RudyS
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Re: How long to keep IRA records?

Post by RudyS » Sun Aug 13, 2017 12:17 pm

My question was sort of based on "what could go wrong if I didn't have those statements." I haven't made any contributions for 15 years, so any question about contributions is beyond the time limit. All contributions were before taxes, so they are fully taxable when I withdraw them. While the conventional wisdom is to keep all IRA records forever, I have a tough time seeing any value, in my specific case. I DO have filing copies of ALL my tax returns forever.

mouses
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Re: How long to keep IRA records?

Post by mouses » Sun Aug 13, 2017 12:42 pm

RudyS wrote:
Sun Aug 13, 2017 12:17 pm
My question was sort of based on "what could go wrong if I didn't have those statements." I haven't made any contributions for 15 years, so any question about contributions is beyond the time limit. All contributions were before taxes, so they are fully taxable when I withdraw them. While the conventional wisdom is to keep all IRA records forever, I have a tough time seeing any value, in my specific case. I DO have filing copies of ALL my tax returns forever.
If you're walked (i.e. not a trustee-to-trustee transfer) a check from one financial institution to another in that time interval, how to you prove that it was IRA money to start with without a financial record?

RudyS
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Re: How long to keep IRA records?

Post by RudyS » Sun Aug 13, 2017 12:50 pm

mouses wrote:
Sun Aug 13, 2017 12:42 pm
RudyS wrote:
Sun Aug 13, 2017 12:17 pm
My question was sort of based on "what could go wrong if I didn't have those statements." I haven't made any contributions for 15 years, so any question about contributions is beyond the time limit. All contributions were before taxes, so they are fully taxable when I withdraw them. While the conventional wisdom is to keep all IRA records forever, I have a tough time seeing any value, in my specific case. I DO have filing copies of ALL my tax returns forever.
If you're walked (i.e. not a trustee-to-trustee transfer) a check from one financial institution to another in that time interval, how to you prove that it was IRA money to start with without a financial record?
Good hypothetical question. But what difference would it make now? Everything I withdraw is fully taxable anyway.

Kompass
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Re: How long to keep IRA records?

Post by Kompass » Sun Aug 13, 2017 12:59 pm

I have a question along similar lines, what if it's inherited?

A couple of years ago my father left me an IRA. Do I need his old records, or is that a moot point after it has been retitled?
The large print giveth and the fine print taketh away.

kaneohe
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Re: How long to keep IRA records?

Post by kaneohe » Sun Aug 13, 2017 1:57 pm

RudyS wrote:
Sun Aug 13, 2017 11:07 am
I've looked in IRS Pub 552, and searched BH. But I'm still unsure about throwing away records from IRAs dating back 25 years. Several transfers from one custodian to another. NO after-tax contributions, hence no 8606's. Since any distributions are now taxable, what can I lose by not keeping these ancient records? Trying to downsize prior to moving.
Here's one specific state example: in 1982-86, you were allowed a Fed deduction of $2K/yr. CA did not allow the deduction if you had a qualified retirement plan Thus for CA , you have 10K basis for those years......not taxable and the basis is applied to the first withdrawals, not pro-rated.

mouses
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Re: How long to keep IRA records?

Post by mouses » Sun Aug 13, 2017 3:09 pm

kaneohe wrote:
Sun Aug 13, 2017 1:57 pm
RudyS wrote:
Sun Aug 13, 2017 11:07 am
I've looked in IRS Pub 552, and searched BH. But I'm still unsure about throwing away records from IRAs dating back 25 years. Several transfers from one custodian to another. NO after-tax contributions, hence no 8606's. Since any distributions are now taxable, what can I lose by not keeping these ancient records? Trying to downsize prior to moving.
Here's one specific state example: in 1982-86, you were allowed a Fed deduction of $2K/yr. CA did not allow the deduction if you had a qualified retirement plan Thus for CA , you have 10K basis for those years......not taxable and the basis is applied to the first withdrawals, not pro-rated.
Yes, few tax people know about this. It is particularly a problem if you move out of state.

RudyS
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Re: How long to keep IRA records?

Post by RudyS » Sun Aug 13, 2017 3:24 pm

mouses wrote:
Sun Aug 13, 2017 3:09 pm
kaneohe wrote:
Sun Aug 13, 2017 1:57 pm
RudyS wrote:
Sun Aug 13, 2017 11:07 am
I've looked in IRS Pub 552, and searched BH. But I'm still unsure about throwing away records from IRAs dating back 25 years. Several transfers from one custodian to another. NO after-tax contributions, hence no 8606's. Since any distributions are now taxable, what can I lose by not keeping these ancient records? Trying to downsize prior to moving.
Here's one specific state example: in 1982-86, you were allowed a Fed deduction of $2K/yr. CA did not allow the deduction if you had a qualified retirement plan Thus for CA , you have 10K basis for those years......not taxable and the basis is applied to the first withdrawals, not pro-rated.
Yes, few tax people know about this. It is particularly a problem if you move out of state.
This became personal! We do plan to move to Massachusetts. So, I checked the law: " Since Massachusetts does not allow a deduction for amounts originally contributed to an IRA or Keogh, the distributions are not taxable until the full amount of your contributions which were previously subject to Massachusetts taxes are recovered." BUT, it doesn't matter because I was not previously taxed in Massachusetts (nor my home state) on the contributions. Nevertheless, those are great points.
Last edited by RudyS on Sun Aug 13, 2017 9:12 pm, edited 1 time in total.

mouses
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Re: How long to keep IRA records?

Post by mouses » Sun Aug 13, 2017 3:25 pm

RudyS wrote:
Sun Aug 13, 2017 12:50 pm
mouses wrote:
Sun Aug 13, 2017 12:42 pm
RudyS wrote:
Sun Aug 13, 2017 12:17 pm
My question was sort of based on "what could go wrong if I didn't have those statements." I haven't made any contributions for 15 years, so any question about contributions is beyond the time limit. All contributions were before taxes, so they are fully taxable when I withdraw them. While the conventional wisdom is to keep all IRA records forever, I have a tough time seeing any value, in my specific case. I DO have filing copies of ALL my tax returns forever.
If you're walked (i.e. not a trustee-to-trustee transfer) a check from one financial institution to another in that time interval, how to you prove that it was IRA money to start with without a financial record?
Good hypothetical question. But what difference would it make now? Everything I withdraw is fully taxable anyway.
It makes a difference in that if there is money in there that should not be, the person should have been paying taxes on its earnings all these years.

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runner26
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Re: How long to keep IRA records?

Post by runner26 » Sun Aug 13, 2017 3:27 pm

kaneohe wrote:
Sun Aug 13, 2017 1:57 pm
RudyS wrote:
Sun Aug 13, 2017 11:07 am
I've looked in IRS Pub 552, and searched BH. But I'm still unsure about throwing away records from IRAs dating back 25 years. Several transfers from one custodian to another. NO after-tax contributions, hence no 8606's. Since any distributions are now taxable, what can I lose by not keeping these ancient records? Trying to downsize prior to moving.
Here's one specific state example: in 1982-86, you were allowed a Fed deduction of $2K/yr. CA did not allow the deduction if you had a qualified retirement plan Thus for CA , you have 10K basis for those years......not taxable and the basis is applied to the first withdrawals, not pro-rated.
One reason I was excited when I was able to do a TIRA to Roth conversion in CA, to clear this off of my must remember list before I go too old to remember to deal with it.

kaneohe
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Re: How long to keep IRA records?

Post by kaneohe » Sun Aug 13, 2017 10:37 pm

Kompass wrote:
Sun Aug 13, 2017 12:59 pm
I have a question along similar lines, what if it's inherited?

A couple of years ago my father left me an IRA. Do I need his old records, or is that a moot point after it has been retitled?
You might to go thru old tax returns to see if there is basis in the IRA If he was taking RMDs,then you should find an F8606 if there was basis.
If he was not yet taking RMDs, then if there was an F8606 , it could be any year in the past and wouldn't be in all returns.

mouses
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Re: How long to keep IRA records?

Post by mouses » Mon Aug 14, 2017 3:50 am

runner26 wrote:
Sun Aug 13, 2017 3:27 pm
kaneohe wrote:
Sun Aug 13, 2017 1:57 pm
RudyS wrote:
Sun Aug 13, 2017 11:07 am
I've looked in IRS Pub 552, and searched BH. But I'm still unsure about throwing away records from IRAs dating back 25 years. Several transfers from one custodian to another. NO after-tax contributions, hence no 8606's. Since any distributions are now taxable, what can I lose by not keeping these ancient records? Trying to downsize prior to moving.
Here's one specific state example: in 1982-86, you were allowed a Fed deduction of $2K/yr. CA did not allow the deduction if you had a qualified retirement plan Thus for CA , you have 10K basis for those years......not taxable and the basis is applied to the first withdrawals, not pro-rated.
One reason I was excited when I was able to do a TIRA to Roth conversion in CA, to clear this off of my must remember list before I go too old to remember to deal with it.
That's what I did, because the state I was about to move to had no way to deal with this.

Swansea
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Re: How long to keep IRA records?

Post by Swansea » Mon Aug 14, 2017 5:39 am

I asked my CPA that question this year. He said since all my IRA contributions were taxed deferred, there was no need to keep the records, as I will pay tax on all withdrawals.

RudyS
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Re: How long to keep IRA records?

Post by RudyS » Mon Aug 14, 2017 8:31 am

Swansea wrote:
Mon Aug 14, 2017 5:39 am
I asked my CPA that question this year. He said since all my IRA contributions were taxed deferred, there was no need to keep the records, as I will pay tax on all withdrawals.
This was my thinking, and it works for my situation, but the above posts point out that there might be state-specific instances were state tax was not deferred, so records would be needed. Such a wealth of info in this forum! Thanks all.

JW-Retired
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Re: How long to keep IRA records?

Post by JW-Retired » Mon Aug 14, 2017 9:41 am

kaneohe wrote:
Sun Aug 13, 2017 1:57 pm
Here's one specific state example: in 1982-86, you were allowed a Fed deduction of $2K/yr. CA did not allow the deduction if you had a qualified retirement plan Thus for CA , you have 10K basis for those years......not taxable and the basis is applied to the first withdrawals, not pro-rated.
Wow! Thank you kaneohe. I've never heard of this before.

I do have the 1040's and did make $10.5K in contributions from 1982-86. (appears that IRA max was $2250 in 85 & 86). Unfortunately, I Roth converted all my tIRA money several years ago so maybe I'm out of luck. :oops: I think it's too late to amend 2013 federal & CA state taxes?

Would it be legitimate to roll $10.5k from my 401k to an IRA, and then Roth convert it to capture the state tax deduction for this tax year?
JW
ps: now think the extra $250/year was spouse contribution.
Retired at Last

kaneohe
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Re: How long to keep IRA records?

Post by kaneohe » Mon Aug 14, 2017 10:49 am

JW-Retired wrote:
Mon Aug 14, 2017 9:41 am
......................................
I do have the 1040's and did make $10.5K in contributions from 1982-86. (appears that IRA max was $2250 in 85 & 86). Unfortunately, I Roth converted all my tIRA money several years ago so maybe I'm out of luck. :oops: I think it's too late to amend 2013 federal & CA state taxes?

Would it be legitimate to roll $10.5k from my 401k to an IRA, and then Roth convert it to capture the state tax deduction for this tax year?
JW
...................................
Not sure.........you might want to ask at fairmark.com in the retirement forum. Alan S. would know. Or you can post in separate thread here since Alan S. also is here. Perhaps you already got your fair share? On the Fed returns, you would have taken an IRA deduction for those years. You should also for the CA return removed that deduction by an adjustment on Sch CA. If you didn't then you would have gotten the benefit of a deduction when you shouldn't have......so it would be fair to pay CA when you Roth converted.

The other issue is even if you did make that CA adjustment (effectively no CA deduction for those years), the basis is supposed to be recovered with
the first withdrawals taken.........I believe for Federal, if you don't take your basis when you should, that portion might be lost because IRS doesn't want you to have the freedom to pick an choose when you recover the basis. CA might be similar. Worth asking Alan tho.

jebmke
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Re: How long to keep IRA records?

Post by jebmke » Mon Aug 14, 2017 10:51 am

I keep all my records from institutions. I can always find something less important to throw away or recycle.
When you discover that you are riding a dead horse, the best strategy is to dismount.

Billionaire
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Re: How long to keep IRA records?

Post by Billionaire » Mon Aug 14, 2017 11:09 am

Geologist wrote:
Sun Aug 13, 2017 12:07 pm
It would probably be a good idea to keep all the Form 5498's that custodians sent you. My guess is that other records from them are superfluous.
I agree with this.

Where things get really complicated is when you have non-deduction contributions co-mingled with deductible contributions. In that case you need to keep meticulous records so that when you take distributions, you (and possibly your beneficiaries) can determine the taxable portion. I have three IRA accounts - ROTH, one IRA containing all deductible contributions and one IRA containing all non-deductible contributions. I was talking to a financial planner and he didn't think it was a good idea to make non-deductible contributions, mainly due to the hassle of keeping track of the taxable portion. I agreed with him and have plans to liquidate my non-deductible IRA within the first year or two of my retirement.

kaneohe
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Re: How long to keep IRA records?

Post by kaneohe » Mon Aug 14, 2017 11:23 am

Billionaire wrote:
Mon Aug 14, 2017 11:09 am
...........................................
Where things get really complicated is when you have non-deduction contributions co-mingled with deductible contributions. In that case you need to keep meticulous records so that when you take distributions, you (and possibly your beneficiaries) can determine the taxable portion. I have three IRA accounts - ROTH, one IRA containing all deductible contributions and one IRA containing all non-deductible contributions. I was talking to a financial planner and he didn't think it was a good idea to make non-deductible contributions, mainly due to the hassle of keeping track of the taxable portion. I agreed with him and have plans to liquidate my non-deductible IRA within the first year or two of my retirement.
Unfortunately it's not this simple.......your "non-deductible" IRA is really just an IRA w/ non-deductible contributions. It also contains earnings which are taxable when withdrawn . So your "non-deductible" IRA is already contaminated w/ earnings. Also IRS views all your TIRAs as ONE so even if
you have separate accounts, that does not help you. You needed to file F8606 when you made the non-deductible contribution which tracks your
basis (non-deductible contributions). It is a relatively simple form and keeps track of basis but of course, the taxable portion is just the other part.
Have you tried filling one out? It's reputation as a major hassle does not live up to reality if you actually do it instead of thinking about it.

retiredjg
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Re: How long to keep IRA records?

Post by retiredjg » Mon Aug 14, 2017 11:44 am

Billionaire wrote: I agreed with him and have plans to liquidate my non-deductible IRA within the first year or two of my retirement.
Perhaps I'm reading something into this statement, but it sounds like you think you can just take the money from the IRA with the non-deductible contributions and not pay tax. You cannot do that. All your IRAs (except Roth) have to be pro-rated. Are you aware of that? Do you have your Forms 8606 documenting the non-deductible contributions?

Billionaire
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Re: How long to keep IRA records?

Post by Billionaire » Mon Aug 14, 2017 11:46 am

kaneohe wrote:
Mon Aug 14, 2017 11:23 am
Billionaire wrote:
Mon Aug 14, 2017 11:09 am
...........................................
Where things get really complicated is when you have non-deduction contributions co-mingled with deductible contributions. In that case you need to keep meticulous records so that when you take distributions, you (and possibly your beneficiaries) can determine the taxable portion. I have three IRA accounts - ROTH, one IRA containing all deductible contributions and one IRA containing all non-deductible contributions. I was talking to a financial planner and he didn't think it was a good idea to make non-deductible contributions, mainly due to the hassle of keeping track of the taxable portion. I agreed with him and have plans to liquidate my non-deductible IRA within the first year or two of my retirement.
Unfortunately it's not this simple.......your "non-deductible" IRA is really just an IRA w/ non-deductible contributions. It also contains earnings which are taxable when withdrawn . So your "non-deductible" IRA is already contaminated w/ earnings. Also IRS views all your TIRAs as ONE so even if
you have separate accounts, that does not help you. You needed to file F8606 when you made the non-deductible contribution which tracks your
basis (non-deductible contributions). It is a relatively simple form and keeps track of basis but of course, the taxable portion is just the other part.
Have you tried filling one out? It's reputation as a major hassle does not live up to reality if you actually do it instead of thinking about it.
Yes I fill out Form 8606 and realize I'll have a tax liability when I liquidate.

Billionaire
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Re: How long to keep IRA records?

Post by Billionaire » Mon Aug 14, 2017 11:48 am

retiredjg wrote:
Mon Aug 14, 2017 11:44 am
Billionaire wrote: I agreed with him and have plans to liquidate my non-deductible IRA within the first year or two of my retirement.
Perhaps I'm reading something into this statement, but it sounds like you think you can just take the money from the IRA with the non-deductible contributions and not pay tax. You cannot do that. All your IRAs (except Roth) have to be pro-rated. Are you aware of that? Do you have your Forms 8606 documenting the non-deductible contributions?
Either you read into it or I just did not provide the nitty, gritty details. I understand there will be a tax liability.

kaneohe
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Re: How long to keep IRA records?

Post by kaneohe » Mon Aug 14, 2017 12:45 pm

Billionaire wrote:
Mon Aug 14, 2017 11:48 am
retiredjg wrote:
Mon Aug 14, 2017 11:44 am
Billionaire wrote: I agreed with him and have plans to liquidate my non-deductible IRA within the first year or two of my retirement.
Perhaps I'm reading something into this statement, but it sounds like you think you can just take the money from the IRA with the non-deductible contributions and not pay tax. You cannot do that. All your IRAs (except Roth) have to be pro-rated. Are you aware of that? Do you have your Forms 8606 documenting the non-deductible contributions?
Either you read into it or I just did not provide the nitty, gritty details. I understand there will be a tax liability.
What is the purpose of liquidating the "non-deductible" IRA? Do you realize you are saddled w/ the" hassle" of tracking the taxable/non-taxable numbers forever or until you liquidate all TIRAs. Liquidating one account is not going to relieve of that task.

Think of deductible contributions/earnings as clear water and non-deductible as colored water. When you have them together in an account, you
just have a batch of colored water and you can't separate the component parts. You may think you have a bottle of colored water and a bottle of clear water so once you get rid of the colored water, you are home free.

However IRS regards your situation as a single bottle of colored water. Even if you take out an amount equal to the non-deductible IRA,
the remaining water is still colored.......partially taxable/partially not.
Last edited by kaneohe on Mon Aug 14, 2017 3:00 pm, edited 1 time in total.

TravelforFun
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Re: How long to keep IRA records?

Post by TravelforFun » Mon Aug 14, 2017 1:13 pm

I don't keep my IRA records. I get Form 1099 R from my brokerage house for my IRA distribution and I use that to file my tax return. IRA distribution is taxed as regular income anyway.

mouses
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Re: How long to keep IRA records?

Post by mouses » Mon Aug 14, 2017 5:16 pm

Billionaire wrote:
Mon Aug 14, 2017 11:09 am
Geologist wrote:
Sun Aug 13, 2017 12:07 pm
It would probably be a good idea to keep all the Form 5498's that custodians sent you. My guess is that other records from them are superfluous.
I agree with this.

Where things get really complicated is when you have non-deduction contributions co-mingled with deductible contributions. In that case you need to keep meticulous records so that when you take distributions, you (and possibly your beneficiaries) can determine the taxable portion. I have three IRA accounts - ROTH, one IRA containing all deductible contributions and one IRA containing all non-deductible contributions. I was talking to a financial planner and he didn't think it was a good idea to make non-deductible contributions, mainly due to the hassle of keeping track of the taxable portion. I agreed with him and have plans to liquidate my non-deductible IRA within the first year or two of my retirement.
i think the 8606s take care of this, leaving aside the question of records to support it.

This is all too complicated.

Billionaire
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Re: How long to keep IRA records?

Post by Billionaire » Tue Aug 15, 2017 11:04 am

Didn't mean to go on a tangent here, but my point was when you have deductible AND non-deductible in the same IRA account, in other words co-mingled contribution dollars, it can get difficult for you or your beneficiaries to determine the correct taxable amount.

My personal situation is to liquidate my IRA accounts in the following order.

1. Non-deductible IRA. Contains my original non-deductible IRA contributions, plus earnings. When I retire in a year, I'll pay income tax on the earnings. I'm liquidating this first in the event I die young and my beneficiaries are left with the balance. They won't have to determine the taxable amount.
2. Deductible IRA. Contains my original deductible IRA contributions, plus 401K rollovers. 100% taxable.
3. Roth IRA. Contains my IRA conversion from 1998. 100% tax free.

JW-Retired
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Re: How long to keep IRA records?

Post by JW-Retired » Tue Aug 15, 2017 12:24 pm

Billionaire wrote:
Tue Aug 15, 2017 11:04 am
Didn't mean to go on a tangent here, but my point was when you have deductible AND non-deductible in the same IRA account, in other words co-mingled contribution dollars, it can get difficult for you or your beneficiaries to determine the correct taxable amount.

My personal situation is to liquidate my IRA accounts in the following order.

1. Non-deductible IRA. Contains my original non-deductible IRA contributions, plus earnings. When I retire in a year, I'll pay income tax on the earnings. I'm liquidating this first in the event I die young and my beneficiaries are left with the balance. They won't have to determine the taxable amount.
2. Deductible IRA. Contains my original deductible IRA contributions, plus 401K rollovers. 100% taxable.
3. Roth IRA. Contains my IRA conversion from 1998. 100% tax free.
Sorry, but this just doesn't work. All your IRA accounts (that are not Roths) are co-mingled for purposes of taxation of withdrawals from any one of them. Take a look at IRS form 8606 to see how this happens.
JW
Retired at Last

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Artsdoctor
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Re: How long to keep IRA records?

Post by Artsdoctor » Tue Aug 15, 2017 12:45 pm

If ALL of your money in a tax-deferred account will be taxed on the way out, why would you need 25 years of statements? From a federal tax point of view, I would think that the IRS would be extremely happy to tax everything coming out of a tax-deferred account.

If you've mingled pre- and post-tax money, I can see the need to keep the records and you've been transferring that amount around and rolling things over, you've got a bit of a headache anyway. You'll probably need all the records you can get.

It's always a good idea to understand state tax law and if you think you're going to be moving around, those records could come in handy. There are 50 states and there's bound to be idiosyncrasies out there somewhere.

mouses
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Re: How long to keep IRA records?

Post by mouses » Tue Aug 15, 2017 1:50 pm

JW-Retired wrote:
Tue Aug 15, 2017 12:24 pm
Billionaire wrote:
Tue Aug 15, 2017 11:04 am
Didn't mean to go on a tangent here, but my point was when you have deductible AND non-deductible in the same IRA account, in other words co-mingled contribution dollars, it can get difficult for you or your beneficiaries to determine the correct taxable amount.

My personal situation is to liquidate my IRA accounts in the following order.

1. Non-deductible IRA. Contains my original non-deductible IRA contributions, plus earnings. When I retire in a year, I'll pay income tax on the earnings. I'm liquidating this first in the event I die young and my beneficiaries are left with the balance. They won't have to determine the taxable amount.
2. Deductible IRA. Contains my original deductible IRA contributions, plus 401K rollovers. 100% taxable.
3. Roth IRA. Contains my IRA conversion from 1998. 100% tax free.
Sorry, but this just doesn't work. All your IRA accounts (that are not Roths) are co-mingled for purposes of taxation of withdrawals from any one of them. Take a look at IRS form 8606 to see how this happens.
JW
This has already been stated above, but Billionaire seems to have skipped over reading that one and does not realize he is wrong about how this works. Also his financial person is shockingly ill-informed since he does not seem to understand this basic item either.
Last edited by mouses on Tue Aug 15, 2017 1:52 pm, edited 2 times in total.

Billionaire
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Re: How long to keep IRA records?

Post by Billionaire » Tue Aug 15, 2017 1:51 pm

JW-Retired wrote:
Tue Aug 15, 2017 12:24 pm
Billionaire wrote:
Tue Aug 15, 2017 11:04 am
Didn't mean to go on a tangent here, but my point was when you have deductible AND non-deductible in the same IRA account, in other words co-mingled contribution dollars, it can get difficult for you or your beneficiaries to determine the correct taxable amount.

My personal situation is to liquidate my IRA accounts in the following order.

1. Non-deductible IRA. Contains my original non-deductible IRA contributions, plus earnings. When I retire in a year, I'll pay income tax on the earnings. I'm liquidating this first in the event I die young and my beneficiaries are left with the balance. They won't have to determine the taxable amount.
2. Deductible IRA. Contains my original deductible IRA contributions, plus 401K rollovers. 100% taxable.
3. Roth IRA. Contains my IRA conversion from 1998. 100% tax free.
Sorry, but this just doesn't work. All your IRA accounts (that are not Roths) are co-mingled for purposes of taxation of withdrawals from any one of them. Take a look at IRS form 8606 to see how this happens.
JW
How about if I start withdrawing at age 62? Hmmmm. looking at form 8606 and instructions. I got some homework to do.

Church Lady
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Re: How long to keep IRA records?

Post by Church Lady » Tue Aug 15, 2017 9:01 pm

Interesting discussion about deductible and non deductible assets in an IRA. I have a traditional IRA like this. I also lived in California when I funded most of this IRA. This means I had NO California deductions, and some federal deductions in this traditional IRA. I had completely forgotten about the California no-deduction rule until reminded in this thread.

I don't live in California now. It seems to me I can't take advantage of the "California basis" of my tIRA, in the same way California can't demand I, a former resident, pay California income tax on withdrawals from this tIRA. I'll pay full state tax to whatever state I live in. Unless maybe I move back to California :happy

True?
He that loveth silver shall not be satisfied with silver; nor he that loveth abundance with increase: this is also vanity. Ecclesiastes 1:8

kaneohe
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Re: How long to keep IRA records?

Post by kaneohe » Tue Aug 15, 2017 9:43 pm

Church Lady wrote:
Tue Aug 15, 2017 9:01 pm
Interesting discussion about deductible and non deductible assets in an IRA. I have a traditional IRA like this. I also lived in California when I funded most of this IRA. This means I had NO California deductions, and some federal deductions in this traditional IRA. I had completely forgotten about the California no-deduction rule until reminded in this thread.

I don't live in California now. It seems to me I can't take advantage of the "California basis" of my tIRA, in the same way California can't demand I, a former resident, pay California income tax on withdrawals from this tIRA. I'll pay full state tax to whatever state I live in. Unless maybe I move back to California :happy

True?
Don't know the answer to your question but perhaps it might be worthwhile to find out your current state's rule on '82-'86 IRA contributions.
If they are the same as CA, then ask the state tax folks what the deal is w/ folks like you who changed states w/ the same rules.. After all you didn't get a deduction from current state so why should you pay taxes on that withdrawal. Don't know if you are taking distributions yet but if you are,
there's the matter that the basis applies (in CA ) to the first distributions , so there could be an issue if you didn't claim the basis previously.

retiredjg
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Re: How long to keep IRA records?

Post by retiredjg » Wed Aug 16, 2017 6:21 am

Billionaire wrote:
Tue Aug 15, 2017 1:51 pm
JW-Retired wrote:
Tue Aug 15, 2017 12:24 pm
Billionaire wrote:
Tue Aug 15, 2017 11:04 am
Didn't mean to go on a tangent here, but my point was when you have deductible AND non-deductible in the same IRA account, in other words co-mingled contribution dollars, it can get difficult for you or your beneficiaries to determine the correct taxable amount.

My personal situation is to liquidate my IRA accounts in the following order.

1. Non-deductible IRA. Contains my original non-deductible IRA contributions, plus earnings. When I retire in a year, I'll pay income tax on the earnings. I'm liquidating this first in the event I die young and my beneficiaries are left with the balance. They won't have to determine the taxable amount.
2. Deductible IRA. Contains my original deductible IRA contributions, plus 401K rollovers. 100% taxable.
3. Roth IRA. Contains my IRA conversion from 1998. 100% tax free.
Sorry, but this just doesn't work. All your IRA accounts (that are not Roths) are co-mingled for purposes of taxation of withdrawals from any one of them. Take a look at IRS form 8606 to see how this happens.
JW
How about if I start withdrawing at age 62? Hmmmm. looking at form 8606 and instructions. I got some homework to do.
Withdrawing at 62 does not change anything. You've got the right idea, just the wrong picture.

Let's say your "non-deductible IRA" contains $10k (with $9k being non-deductible contributions) and your "deductible IRA contains" $15k. What you actually have is an IRA of $25k with a basis of $9k.

Every time you withdraw money from either IRA, the taxes will be pro-rated. In other words, 16/25ths will be taxable and 9/25ths will not be taxable at withdrawal.

In reality, the numbers change every time because of changing values, but you get the idea. The withdrawals will be prorated until both IRAs are completely empty.

You might be able to "fix this" by rolling everything but the basis ($16k in this example) into your current 401k, then convert the $9k basis to Roth with no tax. If you decide to do this, I suggest you start a new thread and get more details specific to your situation....just to be sure.

ryman554
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Re: How long to keep IRA records?

Post by ryman554 » Wed Aug 16, 2017 9:17 am

retiredjg wrote:
Wed Aug 16, 2017 6:21 am
Billionaire wrote:
Tue Aug 15, 2017 1:51 pm
JW-Retired wrote:
Tue Aug 15, 2017 12:24 pm
Billionaire wrote:
Tue Aug 15, 2017 11:04 am
Didn't mean to go on a tangent here, but my point was when you have deductible AND non-deductible in the same IRA account, in other words co-mingled contribution dollars, it can get difficult for you or your beneficiaries to determine the correct taxable amount.

My personal situation is to liquidate my IRA accounts in the following order.

1. Non-deductible IRA. Contains my original non-deductible IRA contributions, plus earnings. When I retire in a year, I'll pay income tax on the earnings. I'm liquidating this first in the event I die young and my beneficiaries are left with the balance. They won't have to determine the taxable amount.
2. Deductible IRA. Contains my original deductible IRA contributions, plus 401K rollovers. 100% taxable.
3. Roth IRA. Contains my IRA conversion from 1998. 100% tax free.
Sorry, but this just doesn't work. All your IRA accounts (that are not Roths) are co-mingled for purposes of taxation of withdrawals from any one of them. Take a look at IRS form 8606 to see how this happens.
JW
How about if I start withdrawing at age 62? Hmmmm. looking at form 8606 and instructions. I got some homework to do.
Withdrawing at 62 does not change anything. You've got the right idea, just the wrong picture.

Let's say your "non-deductible IRA" contains $10k (with $9k being non-deductible contributions) and your "deductible IRA contains" $15k. What you actually have is an IRA of $25k with a basis of $9k.

Every time you withdraw money from either IRA, the taxes will be pro-rated. In other words, 16/25ths will be taxable and 9/25ths will not be taxable at withdrawal.

In reality, the numbers change every time because of changing values, but you get the idea. The withdrawals will be prorated until both IRAs are completely empty.

You might be able to "fix this" by rolling everything but the basis ($16k in this example) into your current 401k, then convert the $9k basis to Roth with no tax. If you decide to do this, I suggest you start a new thread and get more details specific to your situation....just to be sure.
+1 for explanation and a mechanism (which I have used in the past) to resolve this. Billionaire, please read this.

retiredjg, I don't understand what you mean by numbers changing. The total value of all accounts change daily, to be sure, so the ratio of basis to total changes, but the basis is forever invariant unless a distribution is made. I make this distinction only because my Fido 401(k) pre/roth/after-tax record-keeping, where this kind of thing is more apparent, muddles the issue somewhat and is not the same as the calculation you are describing.

wrongfunds
Posts: 1908
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Re: How long to keep IRA records?

Post by wrongfunds » Wed Aug 16, 2017 9:34 am

What do you mean basis is "forever invariant"? When you take distribution, the basis also will be deducted based upon the proportionate distribution amount. Every distribution contains fraction of basis and gains.

Continuing the previous example, $25K total of $9K basis.
Took distribution of $5K. The taxable portion 5 x (16/25) = $3.2K non-taxable 5 x (9/25) = $1.8K
You have left $20K of IRA and its basis now will be (9-1.8) = $7.2K

Assume in 4 years, that $20K became $25K. When you take distribution the factors will be (17.8/25) & (7.2/25)

Well, that is how it should be from mathematical perspective but then this is IRS and for all I know it could be different!!

retiredjg
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Re: How long to keep IRA records?

Post by retiredjg » Wed Aug 16, 2017 9:50 am

ryman554 wrote:retiredjg, I don't understand what you mean by numbers changing. The total value of all accounts change daily, to be sure, so the ratio of basis to total changes, but the basis is forever invariant unless a distribution is made.
Yes, I meant that the ratio changes. It might be 9/25ths one day and 8.5/25ths the next day.

Yes, the basis remains the exact same number forever unless some is removed.

retiredjg
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Joined: Thu Jan 10, 2008 12:56 pm

Re: How long to keep IRA records?

Post by retiredjg » Wed Aug 16, 2017 9:53 am

wrongfunds wrote:
Wed Aug 16, 2017 9:34 am
What do you mean basis is "forever invariant"? When you take distribution, the basis also will be deducted based upon the proportionate distribution amount. Every distribution contains fraction of basis and gains.
Read it again. :happy

wrongfunds
Posts: 1908
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Re: How long to keep IRA records?

Post by wrongfunds » Wed Aug 16, 2017 10:39 am

Yes, I meant that the ratio changes. It might be 9/25ths one day and 8.5/25ths the next day.

Yes, the basis remains the exact same number forever unless some is removed.
Can you explain your one day and next day example? If the 9 was the basis of 25 current value, then next day it could be actually 9/26.47 even if that number does match with your quoted 8.5/25 To put it another way, the 9 is invariant until it changes by way of distribution. Please don't use 8.5/25 as example because that actually as confusing as saying "letter K as in knife" when spelling your name to somebody on the phone :-)
Last edited by wrongfunds on Wed Aug 16, 2017 10:47 am, edited 1 time in total.

retiredjg
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Re: How long to keep IRA records?

Post by retiredjg » Wed Aug 16, 2017 10:47 am

Yes, the example did make sense. To me, anyway. :happy

clydewolf
Posts: 732
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Re: How long to keep IRA records?

Post by clydewolf » Wed Aug 16, 2017 10:55 am

Church Lady wrote:
Tue Aug 15, 2017 9:01 pm
Interesting discussion about deductible and non deductible assets in an IRA. I have a traditional IRA like this. I also lived in California when I funded most of this IRA. This means I had NO California deductions, and some federal deductions in this traditional IRA. I had completely forgotten about the California no-deduction rule until reminded in this thread.

I don't live in California now. It seems to me I can't take advantage of the "California basis" of my tIRA, in the same way California can't demand I, a former resident, pay California income tax on withdrawals from this tIRA. I'll pay full state tax to whatever state I live in. Unless maybe I move back to California :happy

True?
Pennsylvania is one state that does not tax retirement income after age 59-1/2.
Many states have exemptions from tax for some amount of retirement income, some states are very generous on this, some states not so generous.
Some states tax all retirement income.

Billionaire
Posts: 299
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Re: How long to keep IRA records?

Post by Billionaire » Wed Aug 16, 2017 11:06 am

Thanks for all the useful information folks. Can't believe I've misunderstood this concept all these years. The good news is that I've kept good records, which are discussed in the instructions for FORM 8606.

kaneohe
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Re: How long to keep IRA records?

Post by kaneohe » Wed Aug 16, 2017 11:22 am

Billionaire wrote:
Wed Aug 16, 2017 11:06 am
Thanks for all the useful information folks. Can't believe I've misunderstood this concept all these years. The good news is that I've kept good records, which are discussed in the instructions for FORM 8606.
so are you still selling the TIRA w/ non-deductible contributions? Why or why not? Have you taken any withdrawals from IRA?

retiredjg
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Re: How long to keep IRA records?

Post by retiredjg » Thu Aug 17, 2017 9:39 am

Billionaire wrote:
Wed Aug 16, 2017 11:06 am
Thanks for all the useful information folks. Can't believe I've misunderstood this concept all these years. The good news is that I've kept good records, which are discussed in the instructions for FORM 8606.
There is another "work around" similar to the one I mentioned above, but closer to what you had in mind.

You could roll just what you call the "deductible IRA" into your 401k before retirement. Then liquidate your "non-deductible IRA" as you had planned knowing that tax will be due. Then, after December 31, (this is crucial) roll the entire 401k to IRA and continue on as you had planned.

Second (and better) variation....You could roll just what you call the "deductible IRA" into your 401k before retirement. Convert the other IRA to Roth, again expecting to pay tax next tax day. After December 31 (this is crucial), roll the entire 401k to IRA and continue on as you had planned. I like this plan better because it moves money to Roth instead of taxable, with the same amount of tax paid.
Last edited by retiredjg on Thu Aug 17, 2017 4:39 pm, edited 1 time in total.

RudyS
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Re: How long to keep IRA records and how to take distributions

Post by RudyS » Thu Aug 17, 2017 9:52 am

RudyS wrote:
Sun Aug 13, 2017 11:07 am
I've looked in IRS Pub 552, and searched BH. But I'm still unsure about throwing away records from IRAs dating back 25 years. Several transfers from one custodian to another. NO after-tax contributions, hence no 8606's. Since any distributions are now taxable, what can I lose by not keeping these ancient records? Trying to downsize prior to moving.

UPDATE: There are some state-specific issues to watch out for, described in a couple of the replies.
EDIT 8/17/2017: Changed the subject because the thread went into another direction.

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