Order or distributions on Roth IRA

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international001
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Order or distributions on Roth IRA

Post by international001 » Wed Oct 23, 2019 6:21 pm

Checking:
http://retirementlc.com/wp-content/uplo ... -Rules.pdf

So let's say on year 0
- I contribute to my Roth IRA $5k
- I do megabackdoor of $30k of 401k after-tax, that it has $1k in earnings. You'll have to pay some tax on that $1k
On year 4
- I have $50k total on my Roth IRA (so $14k was earnings)
This is the distributions I can do before waiting on retirment
1- I can take $5k w/o penalty
2- I can take $1k but I have to pay penalty. So perhaps wait to year 5
3- I can take $30k w/o penalty
4- I can take $14 , but I'll have to pay penalty

IS the above correct? Is there a way of avoiding 2, perhaps rolling the $1k in an IRA? But then the pro-rata rule would affect you if you want to do a nomal backdoor (the IRA would have the $1k pre-tax money + $6k after-tax you contribute for the normal backdoor), right? I understand it won't affect the megabackdoor (after-tax-contributions can still go directly to Roth IRA w/o any prorata rule)

If I'm reading it right, it's a pain having to wait 5 years to distribute 3), just because a few $$ in 2.

Also, is this kept track in the brokerage (like Vanguard), or are you supposed to do it?

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FiveK
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Re: Order or distributions on Roth IRA

Post by FiveK » Wed Oct 23, 2019 7:32 pm

international001 wrote:
Wed Oct 23, 2019 6:21 pm
IS the above correct?
Yes, if you are under age 59.5. If you are over 59.5, there is no penalty on #2.
Is there a way of avoiding 2, perhaps rolling the $1k in an IRA?
And then rolling the IRA back to the 401k, if your plan allows.
If I'm reading it right, it's a pain having to wait 5 years to distribute 3), just because a few $$ in 2.
Or just pay the $100 (10% of $1000) and call it good.
Also, is this kept track in the brokerage (like Vanguard), or are you supposed to do it?
Don't know if any brokerage will help, but in the general case your money could go hither and yon so it's up to you.

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Re: Order or distributions on Roth IRA

Post by retiredjg » Thu Oct 24, 2019 7:40 am

I think you have it correct.

If you really need the $30k before the 5 years is up, paying $100 penalty on the $1,000 should not be much of an issue.

You can avoid the penalty on the $1,000 earnings by rolling that $1,000 to tIRA instead of Roth IRA and then back into your 401k before the end of the year. That will not mess up your ordinary back door. This assumes that your 401k will accept it.

You must keep up with all of these amounts and dates yourself. You will need that information if you ever remove money from your Roth IRA prior to age 59.5.

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international001
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Re: Order or distributions on Roth IRA

Post by international001 » Thu Oct 24, 2019 3:07 pm

Hi

Yes, at the end it may be simpler to play the penalty. But it's not just about the $. I would like to avoid the hassle if possible.
Transfer tIRA -> 401k seems like an idea. I'll check it out if my plan allows

What about regular backdoor? (i.e after-tax to tIRA and then rollover to Roth)
Let's say I contribute $6000 to tIRA, and I try to do the rollover to the Roth the same day, but it still goes up in value to $6100
I had to transfer the whole $6100 to the Roth. Is not possible to just transfer the after tax $6000 to Roth, is it?

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FiveK
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Re: Order or distributions on Roth IRA

Post by FiveK » Thu Oct 24, 2019 3:17 pm

international001 wrote:
Thu Oct 24, 2019 3:07 pm
What about regular backdoor? (i.e after-tax to tIRA and then rollover to Roth)
Let's say I contribute $6000 to tIRA, and I try to do the rollover to the Roth the same day, but it still goes up in value to $6100
I had to transfer the whole $6100 to the Roth. Is not possible to just transfer the after tax $6000 to Roth, is it?
You will run into what is called the "pro-rata rule." See Backdoor Roth - Bogleheads.

Filling out a test form 8606 may be helpful if reading the wiki article isn't sufficient.

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Re: Order or distributions on Roth IRA

Post by retiredjg » Thu Oct 24, 2019 4:14 pm

international001 wrote:
Thu Oct 24, 2019 3:07 pm
What about regular backdoor? (i.e after-tax to tIRA and then rollover to Roth)
Let's say I contribute $6000 to tIRA, and I try to do the rollover to the Roth the same day, but it still goes up in value to $6100
I had to transfer the whole $6100 to the Roth. Is not possible to just transfer the after tax $6000 to Roth, is it?
It is possible but you do not want to do it. In a case like this, whatever is in the tIRA should be converted to Roth and just pay taxes on the earnings. If you don't want that, put the money into money market so it will not make $100 before the conversion.

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international001
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Re: Order or distributions on Roth IRA

Post by international001 » Fri Oct 25, 2019 6:01 pm

retiredjg wrote:
Thu Oct 24, 2019 4:14 pm
international001 wrote:
Thu Oct 24, 2019 3:07 pm
What about regular backdoor? (i.e after-tax to tIRA and then rollover to Roth)
Let's say I contribute $6000 to tIRA, and I try to do the rollover to the Roth the same day, but it still goes up in value to $6100
I had to transfer the whole $6100 to the Roth. Is not possible to just transfer the after tax $6000 to Roth, is it?
It is possible but you do not want to do it. In a case like this, whatever is in the tIRA should be converted to Roth and just pay taxes on the earnings. If you don't want that, put the money into money market so it will not make $100 before the conversion.
What do you mean it's possible? Can I really transfer only $6000 to the Roth IRA? What do you do with the prorata rules?

I usually transfer funds to Vanguard settlement funds. IT will give me a few cents on earnings, that I would like to avoid. Can I transfer it to a fund with 0 yield?

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international001
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Re: Order or distributions on Roth IRA

Post by international001 » Fri Oct 25, 2019 6:06 pm

FiveK wrote:
Thu Oct 24, 2019 3:17 pm
international001 wrote:
Thu Oct 24, 2019 3:07 pm
What about regular backdoor? (i.e after-tax to tIRA and then rollover to Roth)
Let's say I contribute $6000 to tIRA, and I try to do the rollover to the Roth the same day, but it still goes up in value to $6100
I had to transfer the whole $6100 to the Roth. Is not possible to just transfer the after tax $6000 to Roth, is it?
You will run into what is called the "pro-rata rule." See Backdoor Roth - Bogleheads.

Filling out a test form 8606 may be helpful if reading the wiki article isn't sufficient.
Yes... that's my understanding

I just find a these combination of rules so stupid, that I thought maybe there was a workaround to it.

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FiveK
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Re: Order or distributions on Roth IRA

Post by FiveK » Fri Oct 25, 2019 7:42 pm

international001 wrote:
Fri Oct 25, 2019 6:01 pm
retiredjg wrote:
Thu Oct 24, 2019 4:14 pm
international001 wrote:
Thu Oct 24, 2019 3:07 pm
What about regular backdoor? (i.e after-tax to tIRA and then rollover to Roth)
Let's say I contribute $6000 to tIRA, and I try to do the rollover to the Roth the same day, but it still goes up in value to $6100
I had to transfer the whole $6100 to the Roth. Is not possible to just transfer the after tax $6000 to Roth, is it?
It is possible but you do not want to do it. In a case like this, whatever is in the tIRA should be converted to Roth and just pay taxes on the earnings. If you don't want that, put the money into money market so it will not make $100 before the conversion.
What do you mean it's possible? Can I really transfer only $6000 to the Roth IRA?
Sure. You are under no obligation to transfer any particular amount or fraction of your balance.
What do you do with the prorata rules?
Just fill and file form 8606 and accept what it calculates.
I usually transfer funds to Vanguard settlement funds. IT will give me a few cents on earnings, that I would like to avoid. Can I transfer it to a fund with 0 yield?
Don't know about a 0 yield fund, but why worry? "A few cents" will round to $0 on tax forms, and if you do happen to make more than that, it's better to pay tax on income than not to have any income.

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Re: Order or distributions on Roth IRA

Post by retiredjg » Sat Oct 26, 2019 6:49 am

international001 wrote:
Fri Oct 25, 2019 6:01 pm
What do you mean it's possible? Can I really transfer only $6000 to the Roth IRA? What do you do with the prorata rules?
You can convert any amount of the IRA to Roth that you want. But it would be dumb to just convert the $6k because at the end of the year, whatever you converted is going to get pro-rated with what was left in the IRA.

I usually transfer funds to Vanguard settlement funds. IT will give me a few cents on earnings, that I would like to avoid. Can I transfer it to a fund with 0 yield?
It is a waste of your time and energy to avoid the pennies. Just convert them to Roth as well. And check a few months later to be sure more pennies have not shown up in your IRA. If some do, just convert them to Roth as well.

I don't know if there is a fund with 0% yield.

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international001
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Re: Order or distributions on Roth IRA

Post by international001 » Sat Oct 26, 2019 10:24 am

retiredjg wrote:
Sat Oct 26, 2019 6:49 am
international001 wrote:
Fri Oct 25, 2019 6:01 pm
What do you mean it's possible? Can I really transfer only $6000 to the Roth IRA? What do you do with the prorata rules?
You can convert any amount of the IRA to Roth that you want. But it would be dumb to just convert the $6k because at the end of the year, whatever you converted is going to get pro-rated with what was left in the IRA.

I usually transfer funds to Vanguard settlement funds. IT will give me a few cents on earnings, that I would like to avoid. Can I transfer it to a fund with 0 yield?
It is a waste of your time and energy to avoid the pennies. Just convert them to Roth as well. And check a few months later to be sure more pennies have not shown up in your IRA. If some do, just convert them to Roth as well.

I don't know if there is a fund with 0% yield.
I think there was a confusion. I meant to convert *the* $6000 only. i.e. the $6000 that correspond to contribution. But it's not possible, since you would have to prorate that $6000 with the other $100

If there is now way of avoiding the bullet, I'll deal with it. It's not about the pennies, but about the simplification. I don't want having to start counting what amount of penalties do I owe if I even need a distribution before 59.5

Anybody knows how the IRS keeps track of it? Are you supposed to prove it somehow?

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Re: Order or distributions on Roth IRA

Post by retiredjg » Sat Oct 26, 2019 10:51 am

If you make a contribution and invest it in something like money market and convert the next day, there should be little to any interest to worry about. It is likely to be less than $.50 so it can be rounded down to $0. Just convert the entire tIRA, rounding your $6,000.39 down to $6,000 and be done with it.

The IRS gets a form each year showing the balance of your IRAs on 12/31 of the last year. If you did a Roth conversion and failed to pro-rate it with was is in your tIRA on 12/31, you may get an inquiry 2 years later. Unwinding these things is a pain, especially after two years have passed.

I don't want having to start counting what amount of penalties do I owe if I even need a distribution before 59.5
You can avoid this with your mega-back door by sending the earnings to tIRA and rolling it back into your 401k before the end of the year.

You can probably avoid this with your ordinary back door by investing in money market and converting the next possible day.

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international001
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Re: Order or distributions on Roth IRA

Post by international001 » Sun Oct 27, 2019 3:29 pm

Tx... with the current low rates you are right. $6k interest on one day should be less than $0.50. So rounding is a good workaround, at least for now.

My concern about the IRS is how do they know what amount of contributions, earnings, etc are in my Roth IRA. If they have a way of knowing, why the brokerage doesn't know?

How do I rollback earnings from tIRA (Vanguard) to 401k? Do I have to call them? Get a check from Vanguard?

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FiveK
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Re: Order or distributions on Roth IRA

Post by FiveK » Sun Oct 27, 2019 3:40 pm

international001 wrote:
Sun Oct 27, 2019 3:29 pm
Tx... with the current low rates you are right. $6k interest on one day should be less than $0.50. So rounding is a good workaround, at least for now.

My concern about the IRS is how do they know what amount of contributions, earnings, etc are in my Roth IRA. If they have a way of knowing, why the brokerage doesn't know?

How do I rollback earnings from tIRA (Vanguard) to 401k? Do I have to call them? Get a check from Vanguard?
The IRS gets Form 5498 from all sources. Your brokerage wouldn't know of any from other sources.

Having the receiving firm (in this case, your 401k administrator) guide you on the process steps usually works best for all transfers between brokers.

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Re: Order or distributions on Roth IRA

Post by retiredjg » Sun Oct 27, 2019 3:46 pm

international001 wrote:
Sun Oct 27, 2019 3:29 pm
Tx... with the current low rates you are right. $6k interest on one day should be less than $0.50. So rounding is a good workaround, at least for now.
Even if you earn $1 and have to pay tax on that $1....if you take the money out before the 5 tax year clock is up, you only pay the penalty on that $1. It would cost you 10 cents.

Do you think you might be going a little overboard on this? You have to keep all the same records and fill in the same worksheet for an early withdrawal no matter if the earnings are $1 or $1,000.

My concern about the IRS is how do they know what amount of contributions, earnings, etc are in my Roth IRA. If they have a way of knowing, why the brokerage doesn't know?
What you know and the IRS knows is whether a contribution is deductible or not. And how money got into your Roth IRA (through direct contributions or through conversions or the back door). Your brokerage has no access to that information. What difference does it make?

How do I rollback earnings from tIRA (Vanguard) to 401k? Do I have to call them? Get a check from Vanguard?
Call your 401k and ask.

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international001
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Re: Order or distributions on Roth IRA

Post by international001 » Tue Oct 29, 2019 2:59 pm

YEs.. perhaps I may be going overboard, I just wanted to keep it simple. Perhaps paying a few $$ on penalty is not a big deal

So it seems the brokers don't have the whole picture, but the IRS does. But I cannot call the IRS and ask them

It looks that to do the rollover from my Vanguard tIRA, I have to call Vanguard and ask them for a check to the name of my 401k provider

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Re: Order or distributions on Roth IRA

Post by retiredjg » Tue Oct 29, 2019 4:42 pm

international001 wrote:
Tue Oct 29, 2019 2:59 pm
YEs.. perhaps I may be going overboard, I just wanted to keep it simple. Perhaps paying a few $$ on penalty is not a big deal

So it seems the brokers don't have the whole picture, but the IRS does. But I cannot call the IRS and ask them
What is it you'd like to ask them? The IRS has some forms for you to get "transcrips" of different year's information. And I think you can ask for copies of certain forms as well. This is somewhat limited in that I think you can only go back 10 years or so.

Does the IRS have information that you have lost or didn't save?

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international001
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Re: Order or distributions on Roth IRA

Post by international001 » Tue Oct 29, 2019 8:16 pm

retiredjg wrote:
Tue Oct 29, 2019 4:42 pm
international001 wrote:
Tue Oct 29, 2019 2:59 pm
YEs.. perhaps I may be going overboard, I just wanted to keep it simple. Perhaps paying a few $$ on penalty is not a big deal

So it seems the brokers don't have the whole picture, but the IRS does. But I cannot call the IRS and ask them
What is it you'd like to ask them? The IRS has some forms for you to get "transcrips" of different year's information. And I think you can ask for copies of certain forms as well. This is somewhat limited in that I think you can only go back 10 years or so.

Does the IRS have information that you have lost or didn't save?
Just what amount within the roth IRA belongs to which bucket (contributions, earnings). They should have a way for me to introduce my Roth IRA account and tell me the buckets

But I guess I'll have to keep recording it on a spreadsheet.

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international001
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Re: Order or distributions on Roth IRA

Post by international001 » Tue Nov 12, 2019 12:34 am

Fidelity (401k) sent me some forms to do the tIRA->401k rollover
It tells me that it will accept money from conduit (rollover) IRAs and non-conduit IRAS

Is there a difference between a rollover IRA and a traditional IRA?
I use one trad IRA to do the backdoor. Should I open another IRA to do the megabackdoor (401k->IRA) and the consequent rollover (IRA->401k) ?

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FiveK
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Re: Order or distributions on Roth IRA

Post by FiveK » Tue Nov 12, 2019 1:06 am

international001 wrote:
Tue Nov 12, 2019 12:34 am
Fidelity (401k) sent me some forms to do the tIRA->401k rollover
It tells me that it will accept money from conduit (rollover) IRAs and non-conduit IRAS

Is there a difference between a rollover IRA and a traditional IRA?
Not in terms of taxation. See Rollover, Traditional, And Roth IRAs. But some 401k plans will accept incoming IRA money only from a rollover IRA.
I use one trad IRA to do the backdoor. Should I open another IRA to do the megabackdoor (401k->IRA) and the consequent rollover (IRA->401k) ?
Not necessary in your case (because the 401k will accept money from any tIRA) but it may make it easier to keep track. Or you might prefer to have only the one account, especially if the balance is usually zero and will have funds for only short periods. It's up to you.

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international001
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Re: Order or distributions on Roth IRA

Post by international001 » Tue Nov 12, 2019 8:47 am

So it's just a 'concept' ? Do you have to open a rollover IRA following a different process than a rollover IRA?

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Re: Order or distributions on Roth IRA

Post by retiredjg » Tue Nov 12, 2019 8:58 am

A rollover IRA is a type of traditional IRA. If you rollover a 401k to an IRA, the new IRA is named a "rollover IRA" by your custodian - to indicate where the money came from.

In the past, a 401k could only accept a rollover from a rollover IRA (conduit IRA). Some companies still do it that way.

Your 401k is not that picky. They will also accept a rollover from a "contributory" IRA meaning an IRA that you made ordinary contributions to.

What your 401k cannot accept is any money that is not pre-tax, such as from a non-deductible contribution.

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international001
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Re: Order or distributions on Roth IRA

Post by international001 » Tue Nov 12, 2019 1:29 pm

So the difference between rollover and a contributory IRA is just where the money you have at that moment it's came from?
So If you have contribution money it's a contributory IRA. And you do a complete rollover to a Roth IRA, and then you add money from a 401k rollover, it becomes a rollover IRA?

So the only advantage is to keep things separated, because I guess if money came from a contribution or from a rollover it could make a difference in some cases. But it doesn't matter if I just wipe out the money in my traditional IRA. Am I right?

With Vanguard, If I want to open, I just have to open it it as 'Traditional IRA', right?

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FiveK
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Re: Order or distributions on Roth IRA

Post by FiveK » Tue Nov 12, 2019 1:43 pm

international001 wrote:
Tue Nov 12, 2019 1:29 pm
With Vanguard, If I want to open, I just have to open it it as 'Traditional IRA', right?
If you want a traditional IRA, yes. If you want a Roth IRA, you open it as a Roth IRA.

For your situation, the word rollover is an irrelevant adjective. In other words, it has no effect on your finances and taxation.

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Re: Order or distributions on Roth IRA

Post by retiredjg » Tue Nov 12, 2019 5:50 pm

international001 wrote:
Tue Nov 12, 2019 1:29 pm
So If you have contribution money it's a contributory IRA. And you do a complete rollover to a Roth IRA, and then you add money from a 401k rollover, it becomes a rollover IRA?
I don't think this would happen because a 401k rollover is going to go into a new IRA and they will name it a rollover iRA. But all this is not something you need to worry about.
So the only advantage is to keep things separated, because I guess if money came from a contribution or from a rollover it could make a difference in some cases.
Yes, but not in your case. Your 401k will take an iRA rollover from either source.

But it doesn't matter if I just wipe out the money in my traditional IRA. Am I right?
Depends on which one you mean.

With Vanguard, If I want to open, I just have to open it it as 'Traditional IRA', right?
Yes.

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international001
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Re: Order or distributions on Roth IRA

Post by international001 » Wed Nov 13, 2019 3:54 pm

retiredjg wrote:
Tue Nov 12, 2019 5:50 pm
international001 wrote:
Tue Nov 12, 2019 1:29 pm
So If you have contribution money it's a contributory IRA. And you do a complete rollover to a Roth IRA, and then you add money from a 401k rollover, it becomes a rollover IRA?
I don't think this would happen because a 401k rollover is going to go into a new IRA and they will name it a rollover iRA. But all this is not something you need to worry about.
I'm a bit confused... It doesn't have to go to a new IRA
It's a check from after-tax earnings (i..e pre-tax) than I can deposit in the tIRA that I want.
Is this still called a rollover IRA?

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Re: Order or distributions on Roth IRA

Post by retiredjg » Wed Nov 13, 2019 4:31 pm

international001 wrote:
Wed Nov 13, 2019 3:54 pm
retiredjg wrote:
Tue Nov 12, 2019 5:50 pm
international001 wrote:
Tue Nov 12, 2019 1:29 pm
So If you have contribution money it's a contributory IRA. And you do a complete rollover to a Roth IRA, and then you add money from a 401k rollover, it becomes a rollover IRA?
I don't think this would happen because a 401k rollover is going to go into a new IRA and they will name it a rollover iRA. But all this is not something you need to worry about.
I'm a bit confused... It doesn't have to go to a new IRA
It's a check from after-tax earnings (i..e pre-tax) than I can deposit in the tIRA that I want.
Is this still called a rollover IRA?
No. I think we are talking about two different things. I won't go back and see where we got off track right now, but I was answering your question about "Is there a difference between a rollover IRA and a traditional IRA?"


Just to be sure we are all on the same page, why don't you outline the steps you are planning to take for both your back door and your mega back door. I feel like you've decided something after the October portion of this conversation that we don't know about it yet.

Did you decide to roll the earnings in the after-tax account into tIRA and then back to your 401k?

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international001
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Re: Order or distributions on Roth IRA

Post by international001 » Wed Nov 13, 2019 11:47 pm

Sorry for the confusion

Yes, I decided to roll the earnings in the after-tax account into tIRA and then back to your 401k

Is this tIRA a rollover IRA by any chance?

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FiveK
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Re: Order or distributions on Roth IRA

Post by FiveK » Thu Nov 14, 2019 12:20 am

international001 wrote:
Wed Nov 13, 2019 11:47 pm
Is this tIRA a rollover IRA by any chance?
Does it matter?

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Re: Order or distributions on Roth IRA

Post by retiredjg » Thu Nov 14, 2019 8:44 am

international001 wrote:
Wed Nov 13, 2019 11:47 pm
Is this tIRA a rollover IRA by any chance?
They will probably put it wherever you tell them to put it.


When I was talking earlier about rolling over a 401k to a rollover IRA, I was talking about the entire 401k, not just a distribution from an after-tax account.

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international001
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Re: Order or distributions on Roth IRA

Post by international001 » Thu Nov 14, 2019 9:17 am

Thanks.. it doesn't matter for my 401k
So if you have a trad IRA where the whole 401k is rolled over into, that's somehow marked as 'rollover IRA', and it has some special characteristics. Like being the only kind accepted to rollover to some other 401ks, and perhaps where you cannot do a direct contribution.
I find the naming confusing. It seems the 'status' of 'rollover IRA' is a bit unofficial.

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Re: Order or distributions on Roth IRA

Post by retiredjg » Thu Nov 14, 2019 10:34 am

You are correct. It is confusing. I think the wording is a hold over from when a 401k was only allowed to accept a rollover from a "rollover" or "conduit" IRA. That is no longer true but some plans have held onto the old rules for their own reasons.

The odd thing is you actually can contribute directly to a rollover IRA. That changes its status. It is no longer technically a rollover IRA although the name does not change.

See if you can find some logic in that. :happy

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Re: Order or distributions on Roth IRA

Post by One Ping » Thu Nov 14, 2019 1:12 pm

I thought rollover IRAs retained some of the 'legal' protections of a 401k. Is that not true?
"Re-verify our range to target ... one ping only."

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Re: Order or distributions on Roth IRA

Post by retiredjg » Thu Nov 14, 2019 5:29 pm

One Ping wrote:
Thu Nov 14, 2019 1:12 pm
I thought rollover IRAs retained some of the 'legal' protections of a 401k. Is that not true?
I don't know. I think I have seen some comments along that line now and then. That might be a state thing, not an ERISA thing.

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Re: Order or distributions on Roth IRA

Post by One Ping » Thu Nov 14, 2019 7:31 pm

retiredjg wrote:
Thu Nov 14, 2019 5:29 pm
One Ping wrote:
Thu Nov 14, 2019 1:12 pm
I thought rollover IRAs retained some of the 'legal' protections of a 401k. Is that not true?
I don't know. I think I have seen some comments along that line now and then. That might be a state thing, not an ERISA thing.
Finally had a chance to do some research on this. retiredjg is correct. Found an article on ‘irahelp.com’ that lays it out fairly clearly, up to a point. [How Safe From Creditors is Your 401(k) Money if You Roll it to an IRA?]

A little background. First, when in a 401k …
irahelp wrote: Typically, the only people who can get a piece of your 401(k) money while it’s inside of its protective “ERISA shell” are the IRS and an ex-spouse as part of a divorce proceeding. Other than that, your 401(k) creditor protection shield is virtually impenetrable.
When you move ERISA-protected 401k funds to a rollover IRA, does the protection you had in your 401k follow?
irahelp wrote: Here’s where it can start to get a little complicated, because we actually have to split out your creditor protection into two distinct categories; creditor protection in bankruptcy and creditor protection in a non-bankruptcy event.
For creditor protection in bankruptcy …
irahelp wrote: Although bankruptcy laws are generally determined by each individual state, a 2005 federal law provides your retirement account with strong bankruptcy protection, no matter what state you live in. Under that law, plan funds, including 401(k) funds, are given an unlimited exemption in bankruptcy proceedings. … If you roll that money over to your IRA, the unlimited protection in bankruptcy proceedings will follow right along with it.
For non-bankruptcy creditor protection …
irahelp wrote: [W]hile the unlimited bankruptcy protection those funds had inside the 401(k) follows them in a rollover to an IRA, the creditor protection in non-bankruptcy situations does not. … Instead, after your 401(k) funds are rolled over to an IRA, the non-bankruptcy creditor protection they’ll enjoy will be determined by your state’s laws. In some states, that protection will be roughly equivalent to the protection the funds had while they were in your 401(k). In other states, however, your protection could be much weaker.
So, the answer is … it depends … on which creditor protection you are talking about and which state you live in.

Here is a State-by-State Analysis of IRAs as Exempt Property. The table is excerpted from the The Tax Advisor January 2014 issue article titled Protection From Creditors for Retirement Plan Assets.
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