Help me Streamline IRAs - Multiple Roths, SEP, Trad

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Topic Author
Domadosolo
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Help me Streamline IRAs - Multiple Roths, SEP, Trad

Post by Domadosolo »

IRAs are splintered and I would like to consolidate them:
The IRAs are as follows:
1) Roth#1 established in 2014
2) Roth#2 established in 2015
3) Roth#3 established in 2015 (yes, 2 estd. in 2015)
4) Roth#4 established in 2016
5) Roth#5 established in 2017
6) SEP IRA from self employment
7) Traditional IRA with a basis
8) Rollover IRA from an old 401K
All Roths, #1-#5 are from Roth Conversions.
I don't expect to withdraw from these IRAs until past 59.5

Qns:
Q#1. Can I consolidate #5, #4, #3, and #2 into Roth #1?
Q#2. Is there any barrier to consolidate all Roths at the same time ? (I read conflicting info on a limit of a SINGLE Roth-Roth rollover allowed in any 12 month period)
Q#3. Can/should I rollover #7 & #8 into #6? (I understand that SEP IRAs have certain better protection against creditors)
Q#4. Is there any value in keeping #7 separate, for computation re. the basis in the future, maybe used for future Roth conversions

Any other advice? :confused
Thanks
Last edited by Domadosolo on Tue Sep 01, 2020 2:54 pm, edited 2 times in total.
sailaway
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Re: Help me Streamline IRAs - Multiple Roths, SEP, Trad

Post by sailaway »

I would consolidate the Roth accounts.

Out of pure curiosity, why do you have so many of them? Were you opening a new account with each contribution?

You may want to keep the traditional accounts separate, in case you want to roll them into a 401k at some point in the future and you need to be able to document the sources of those funds.

For #7, do you mean that this IRA has non deductible contributions? If so, are all of the contributions non deductible, or only some?
Topic Author
Domadosolo
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Re: Help me Streamline IRAs - Multiple Roths, SEP, Trad

Post by Domadosolo »

sailaway wrote: Mon Aug 31, 2020 11:51 am Out of pure curiosity, why do you have so many of them? Were you opening a new account with each contribution?
I was advised to do so because of the 5-year rule. Each was an instance of separate Roth Conversion.

sailaway wrote: Mon Aug 31, 2020 11:51 am For #7, do you mean that this IRA has non deductible contributions? If so, are all of the contributions non deductible, or only some?
The account has deductible and partial non-deductible contributions.
sailaway
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Re: Help me Streamline IRAs - Multiple Roths, SEP, Trad

Post by sailaway »

Domadosolo wrote: Mon Aug 31, 2020 11:57 am
sailaway wrote: Mon Aug 31, 2020 11:51 am Out of pure curiosity, why do you have so many of them? Were you opening a new account with each contribution?
I was advised to do so because of the 5-year rule. Each was an instance of separate Roth Conversion.
That is still a bit silly, since you also need to know how much was converted, vs the earnings, unless you are over 59.5. Maybe someone can point out an a clear advantage to this system that I am missing?

Can you still see the amount that was converted on each of the individual accounts? You need to have a spreadsheet that tells you how much was converted each year. It doesn't matter what time of year. Do not combine the accounts until you have created your own records.



sailaway wrote: Mon Aug 31, 2020 11:51 am For #7, do you mean that this IRA has non deductible contributions? If so, are all of the contributions non deductible, or only some?
The account has deductible and partial non-deductible contributions.
The account has deductible and non-deductible. Again, do you have the records showing the dollar amount for the non-deductible portion?

Are you still self employed and adding to the SEP?
retiredjg
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Re: Help me Streamline IRAs - Multiple Roths, SEP, Trad

Post by retiredjg »

Q#1. Can I consolidate #5, #4, #3, and #2 into Roth #1?
Yes, if they all belong to the same person.

Q#2. Is there any barrier to consolidate all Roths at the same time ? (I read conflicting info on a limit of a SINGLE Roth-Roth rollover allowed in any 12 month period)
The once a year limit is for 60 day rollovers - where you get the money and roll it over to the new IRA yourself. If you have them do trustee to trustee transfers, this does not count as your "one a year".

Q#3. Can/should I rollover #7 & #8 into #6? (I understand that SEP IRAs have certain better protection against creditors)
The Rollover IRA can roll into the SEP IRA if the SEP IRA accepts it. However, the rollover IRA probably has pretty good creditor protection anyway unless you put ordinary contributions in there.

I don't recall anyone doing it, but I think you could roll the tIRA with basis into the SEP IRA. However, I'm not sure there is much point in doing this - if you do any Roth conversion, it will be pro-rated with all your IRAs including the SEP IRA.

Q#4. Is there any value in keeping #7 separate, for computation re. the basis in the future, maybe used for future Roth conversions
It won't matter much how many containers you have, any Roth conversion will include all your IRAs including the SEP IRA.

The only way you can separate your basis out is to roll everything except the basis into a 401k (or similar). SEP IRA does not work for this. Would a 401k fit into your situation?
retiredjg
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Re: Help me Streamline IRAs - Multiple Roths, SEP, Trad

Post by retiredjg »

sailaway wrote: Mon Aug 31, 2020 12:06 pm
Domadosolo wrote: Mon Aug 31, 2020 11:57 am
sailaway wrote: Mon Aug 31, 2020 11:51 am Out of pure curiosity, why do you have so many of them? Were you opening a new account with each contribution?
I was advised to do so because of the 5-year rule. Each was an instance of separate Roth Conversion.
That is still a bit silly, since you also need to know how much was converted, vs the earnings, unless you are over 59.5. Maybe someone can point out an a clear advantage to this system that I am missing?
Back when people could re-characterize a Roth conversion, this was suggest by some as way to keep things "cleaner" for the re-characterization.
MrJedi
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Re: Help me Streamline IRAs - Multiple Roths, SEP, Trad

Post by MrJedi »

The main thing I would avoid combining is the Traditional IRA with basis. It can be difficult to get that basis unwound if a bunch of IRAs are comingled, and many plans don't accept IRA roll-ins with basis included.

If you want to do backdoor Roth IRA conversions in the future, you will want to rollover 6) SEP IRA and 8) Rollover IRA into something like a 401k. Then do a partial rollover of the non-basis portion of the 7) Traditional IRA, leaving only the basis left behind. Then you can do a Roth conversion of the basis for no tax and you'll have a clean slate for backdoor Roth IRA strategy.
Topic Author
Domadosolo
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Re: Help me Streamline IRAs - Multiple Roths, SEP, Trad

Post by Domadosolo »

sailaway wrote: Mon Aug 31, 2020 12:06 pm
Domadosolo wrote: Mon Aug 31, 2020 11:57 am
sailaway wrote: Mon Aug 31, 2020 11:51 am Out of pure curiosity, why do you have so many of them? Were you opening a new account with each contribution?
I was advised to do so because of the 5-year rule. Each was an instance of separate Roth Conversion.
That is still a bit silly, since you also need to know how much was converted, vs the earnings, unless you are over 59.5. Maybe someone can point out an a clear advantage to this system that I am missing?

Can you still see the amount that was converted on each of the individual accounts? You need to have a spreadsheet that tells you how much was converted each year. It doesn't matter what time of year. Do not combine the accounts until you have created your own records.
I plan to withdraw after 59.5. So I wouldn't need records, right? (Although I have the records)


sailaway wrote: Mon Aug 31, 2020 11:51 am For #7, do you mean that this IRA has non deductible contributions? If so, are all of the contributions non deductible, or only some?


The account has deductible and non-deductible. Again, do you have the records showing the dollar amount for the non-deductible portion?

Are you still self employed and adding to the SEP?
yes, I have the records and corresponding Form 8606s.
No, I am no longer adding to SEP

Thanks
Topic Author
Domadosolo
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Re: Help me Streamline IRAs - Multiple Roths, SEP, Trad

Post by Domadosolo »

MrJedi wrote: Mon Aug 31, 2020 12:25 pm The main thing I would avoid combining is the Traditional IRA with basis. It can be difficult to get that basis unwound if a bunch of IRAs are comingled, and many plans don't accept IRA roll-ins with basis included.

If you want to do backdoor Roth IRA conversions in the future, you will want to rollover 6) SEP IRA and 8) Rollover IRA into something like a 401k. Then do a partial rollover of the non-basis portion of the 7) Traditional IRA, leaving only the basis left behind. Then you can do a Roth conversion of the basis for no tax and you'll have a clean slate for backdoor Roth IRA strategy.
Explained well !
Topic Author
Domadosolo
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Re: Help me Streamline IRAs - Multiple Roths, SEP, Trad

Post by Domadosolo »

retiredjg wrote: Mon Aug 31, 2020 12:20 pm
sailaway wrote: Mon Aug 31, 2020 12:06 pm
Domadosolo wrote: Mon Aug 31, 2020 11:57 am
sailaway wrote: Mon Aug 31, 2020 11:51 am Out of pure curiosity, why do you have so many of them? Were you opening a new account with each contribution?
I was advised to do so because of the 5-year rule. Each was an instance of separate Roth Conversion.
That is still a bit silly, since you also need to know how much was converted, vs the earnings, unless you are over 59.5. Maybe someone can point out an a clear advantage to this system that I am missing?
Back when people could re-characterize a Roth conversion, this was suggest by some as way to keep things "cleaner" for the re-characterization.
Thats it !. Thats why... But I don't expect to re-char that now.
retiredjg
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Re: Help me Streamline IRAs - Multiple Roths, SEP, Trad

Post by retiredjg »

You could not re-characterize a Roth conversion now if you wanted to. :happy The law changed about 3 years back.
Topic Author
Domadosolo
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Re: Help me Streamline IRAs - Multiple Roths, SEP, Trad

Post by Domadosolo »

retiredjg wrote: Mon Aug 31, 2020 1:35 pm You could not re-characterize a Roth conversion now if you wanted to. :happy The law changed about 3 years back.
True, thanks
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Duckie
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Re: Help me Streamline IRAs - Multiple Roths, SEP, Trad

Post by Duckie »

Domadosolo wrote:Any other advice?
Is the SEP IRA from current self-employment? If so, do you have employees? If not, have you considered a solo 401k instead of a SEP IRA?
Topic Author
Domadosolo
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Re: Help me Streamline IRAs - Multiple Roths, SEP, Trad

Post by Domadosolo »

Duckie wrote: Mon Aug 31, 2020 4:58 pm
Domadosolo wrote:Any other advice?
Is the SEP IRA from current self-employment? If so, do you have employees? If not, have you considered a solo 401k instead of a SEP IRA?
No, its from prior self employment. I am an early retiree 8-)
retiredjg
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Re: Help me Streamline IRAs - Multiple Roths, SEP, Trad

Post by retiredjg »

Retiree? Well, that changes things.

1) Roth#1 established in 2014
2) Roth#2 established in 2015
3) Roth#3 established in 2015 (yes, 2 estd. in 2015)
4) Roth#4 established in 2016
5) Roth#5 established in 2017
All of these are 1 Roth IRA. Hold it wherever you like. Your 5 year qualification clock is satisfied, but you are not yet 59.5. The 2014 and 2015 conversion amounts are available without penalty now. The 2016 and 2017 conversion amounts still have penalty attached to the part that was taxed (if any)when you did the conversions.

6) SEP IRA from self employment
7) Traditional IRA with a basis
8) Rollover IRA from an old 401K
The IRS sees these as all one IRA with basis. Chances are you know the amount of the basis. Any amount you convert to Roth or withdraw to spend will be pro-rated for taxes. This will continue until the IRA is completely empty. Not a big deal - just one more form on your taxes.

There is no need or benefit for keeping anything separate. Well, I take that back - the rollover IRA and the SEP IRA might have more protection from creditors if that is an issue for you. The rollover iRA (if still "pure") should still have ERISA protection. I don't know about the SEP - that might vary on the state level.
Topic Author
Domadosolo
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Re: Help me Streamline IRAs - Multiple Roths, SEP, Trad

Post by Domadosolo »

retiredjg wrote: Tue Sep 01, 2020 6:26 am Retiree? Well, that changes things.

1) Roth#1 established in 2014
2) Roth#2 established in 2015
3) Roth#3 established in 2015 (yes, 2 estd. in 2015)
4) Roth#4 established in 2016
5) Roth#5 established in 2017
All of these are 1 Roth IRA. Hold it wherever you like. Your 5 year qualification clock is satisfied, but you are not yet 59.5. The 2014 and 2015 conversion amounts are available without penalty now. The 2016 and 2017 conversion amounts still have penalty attached to the part that was taxed (if any)when you did the conversions.
@retiredjg, if I roll #5 to #1, does the date for both change to 2014?
6) SEP IRA from self employment
7) Traditional IRA with a basis
8) Rollover IRA from an old 401K
The IRS sees these as all one IRA with basis. Chances are you know the amount of the basis. Any amount you convert to Roth or withdraw to spend will be pro-rated for taxes. This will continue until the IRA is completely empty. Not a big deal - just one more form on your taxes.

There is no need or benefit for keeping anything separate. Well, I take that back - the rollover IRA and the SEP IRA might have more protection from creditors if that is an issue for you. The rollover iRA (if still "pure") should still have ERISA protection. I don't know about the SEP - that might vary on the state level.
Thanks
MrJedi
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Re: Help me Streamline IRAs - Multiple Roths, SEP, Trad

Post by MrJedi »

If you are retired and no longer earning income and contributing, there isn't really a major reason to keep things split up or worry about backdoor Roth or any of that stuff. I would combine for simplicity for sure.
retiredjg
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Re: Help me Streamline IRAs - Multiple Roths, SEP, Trad

Post by retiredjg »

1) Roth#1 established in 2014
2) Roth#2 established in 2015
3) Roth#3 established in 2015 (yes, 2 estd. in 2015)
4) Roth#4 established in 2016
5) Roth#5 established in 2017
All of these are 1 Roth IRA. Hold it wherever you like. Your 5 year qualification clock is satisfied, but you are not yet 59.5. The 2014 and 2015 conversion amounts are available without penalty now. The 2016 and 2017 conversion amounts still have penalty attached to the part that was taxed (if any)when you did the conversions.
@retiredjg, if I roll #5 to #1, does the date for both change to 2014?

There are two different dates to consider.

1. There is a clock for your Roth IRA itself - that clock has finished its 5 year run and that applies to all the different little Roths you have because they are all one for this purpose.

2. There is a clock for each conversion. I believe these are all separate backdoor Roths. Each one had a Roth conversion. The 5 tax year clock has already finished for the 2014 and 2015 conversions.

Let's say your 2016 backdoor was $5,500 and you converted exactly $5,500 because there was no growth before the conversion step. Since nothing was taxed in your 2016 conversion, there is nothing for a clock to attach to.

Let's say your 2017 backdoor was a $5,500 contribution and it grew so you converted $5,600 to Roth in 2017. That $100 that was taxed with the conversion has a 5 tax year clock. The clock runs from Jan 1, 2017 to December 31, 2021. If you take out enough money (before 59.5 or disabled) to dip into that $100...there will be a 10% penalty attached to that $100.

All this assumes you did the conversion step of the 2014 IRA in 2014, and so on. If you contributed in one year and converted in the next year, the times will be different.
Topic Author
Domadosolo
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Re: Help me Streamline IRAs - Multiple Roths, SEP, Trad

Post by Domadosolo »

retiredjg wrote: Tue Sep 01, 2020 8:35 am
1) Roth#1 established in 2014
2) Roth#2 established in 2015
3) Roth#3 established in 2015 (yes, 2 estd. in 2015)
4) Roth#4 established in 2016
5) Roth#5 established in 2017
All of these are 1 Roth IRA. Hold it wherever you like. Your 5 year qualification clock is satisfied, but you are not yet 59.5. The 2014 and 2015 conversion amounts are available without penalty now. The 2016 and 2017 conversion amounts still have penalty attached to the part that was taxed (if any)when you did the conversions.
@retiredjg, if I roll #5 to #1, does the date for both change to 2014?

There are two different dates to consider.

1. There is a clock for your Roth IRA itself - that clock has finished its 5 year run and that applies to all the different little Roths you have because they are all one for this purpose.

2. There is a clock for each conversion. I believe these are all separate backdoor Roths. Each one had a Roth conversion. The 5 tax year clock has already finished for the 2014 and 2015 conversions.

Let's say your 2016 backdoor was $5,500 and you converted exactly $5,500 because there was no growth before the conversion step. Since nothing was taxed in your 2016 conversion, there is nothing for a clock to attach to.

Let's say your 2017 backdoor was a $5,500 contribution and it grew so you converted $5,600 to Roth in 2017. That $100 that was taxed with the conversion has a 5 tax year clock. The clock runs from Jan 1, 2017 to December 31, 2021. If you take out enough money (before 59.5 or disabled) to dip into that $100...there will be a 10% penalty attached to that $100.

All this assumes you did the conversion step of the 2014 IRA in 2014, and so on. If you contributed in one year and converted in the next year, the times will be different.
Do all clocks expire at age 59.5?
drzzzzz
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Re: Help me Streamline IRAs - Multiple Roths, SEP, Trad

Post by drzzzzz »

There is no need or benefit for keeping anything separate. Well, I take that back - the rollover IRA and the SEP IRA might have more protection from creditors if that is an issue for you. The rollover iRA (if still "pure") should still have ERISA protection. I don't know about the SEP - that might vary on the state level.
[/quote]

It is my understanding that rollover IRAs from ERISA plans still have ERISA protection. Does anyone know if that is still true if the rollover IRA is converted to a Roth IRA since Roth IRAs as far as I know don't have rollover attached to their titling or do you just need to keep in a separate Roth IRA if from a rollover?
retiredjg
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Re: Help me Streamline IRAs - Multiple Roths, SEP, Trad

Post by retiredjg »

Domadosolo wrote: Tue Sep 01, 2020 9:03 am Do all clocks expire at age 59.5?
The conversion clocks do expire at 59.5 meaning the penalties go away at 59.5. Your qualification clock has already expired but that may not be true for people who first started Roth IRA sometime after about mid 50's.

The qualification clock (the one for the Roth IRA itself), does not expire at 59.5 - it keeps going if it has not finished yet. But at that point the only thing it affects is the earnings that have occurred inside the Roth IRA itself (or in Roth 401k....but let's not go there.).
Topic Author
Domadosolo
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Re: Help me Streamline IRAs - Multiple Roths, SEP, Trad

Post by Domadosolo »

retiredjg wrote: Tue Sep 01, 2020 9:45 am
Domadosolo wrote: Tue Sep 01, 2020 9:03 am Do all clocks expire at age 59.5?
The conversion clocks do expire at 59.5 meaning the penalties go away at 59.5. Your qualification clock has already expired but that may not be true for people who first started Roth IRA sometime after about mid 50's.

The qualification clock (the one for the Roth IRA itself), does not expire at 59.5 - it keeps going if it has not finished yet. But at that point the only thing it affects is the earnings that have occurred inside the Roth IRA itself (or in Roth 401k....but let's not go there.).
Thank you, I should have clarified that all Roths are from conversions.
FinanceGeek
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Re: Help me Streamline IRAs - Multiple Roths, SEP, Trad

Post by FinanceGeek »

Domadosolo wrote: Tue Sep 01, 2020 2:53 pm Thank you, I should have clarified that all Roths are from conversions.
If OP also had a Roth account which was created via contributions - I assume there's no reason to keep that account separate either?
retiredjg
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Re: Help me Streamline IRAs - Multiple Roths, SEP, Trad

Post by retiredjg »

FinanceGeek wrote: Tue Sep 01, 2020 6:59 pm
Domadosolo wrote: Tue Sep 01, 2020 2:53 pm Thank you, I should have clarified that all Roths are from conversions.
If OP also had a Roth account which was created via contributions - I assume there's no reason to keep that account separate either?
That's correct. The IRS sees all Roth IRAs belonging to one person as one.
Topic Author
Domadosolo
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Re: Help me Streamline IRAs - Multiple Roths, SEP, Trad

Post by Domadosolo »

retiredjg wrote: Wed Sep 02, 2020 5:46 am
FinanceGeek wrote: Tue Sep 01, 2020 6:59 pm
Domadosolo wrote: Tue Sep 01, 2020 2:53 pm Thank you, I should have clarified that all Roths are from conversions.
If OP also had a Roth account which was created via contributions - I assume there's no reason to keep that account separate either?
That's correct. The IRS sees all Roth IRAs belonging to one person as one.
Thanks retiredjg,

a separate question:
A person currently past the age of 59.5 who doesn't have any Roth accounts, but plans to do some Conversions to Roth in the future.
Is there any value to starting the Roth clock now, but converting, $100 now, and then converting the rest in year 4? (unable to convert in Y1-Y3)
Two scenarios:
1) How does it affect the owner of the Roth?, or if it doesn't, should the person just open the first Roth in Yr4?
2) How does it affect the beneficiary, should the owner pass away?
retiredjg
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Re: Help me Streamline IRAs - Multiple Roths, SEP, Trad

Post by retiredjg »

Domadosolo wrote: Wed Sep 02, 2020 12:28 pm A person currently past the age of 59.5 who doesn't have any Roth accounts, but plans to do some Conversions to Roth in the future.
Is there any value to starting the Roth clock now, but converting, $100 now, and then converting the rest in year 4? (unable to convert in Y1-Y3)
Two scenarios:
1) How does it affect the owner of the Roth?, or if it doesn't, should the person just open the first Roth in Yr4?
2) How does it affect the beneficiary, should the owner pass away?
Once a person is 59.5 years old, the 10% penalty goes away. All the money in the Roth IRA is available without tax or penalty with one exception....the earnings that have occurred inside the Roth IRA are still subject to tax until the Roth IRA itself has been open for 5 tax years.

This table shows that (and the things we discussed earlier too).


Re: Roth IRA Rules - Table Approach
Posted by: KAWill, March 12, 2018 06:27PM
......................

Roth IRA Distribution Table

UNDER AGE 59.5
FIVE YEAR CONVERSION HOLDING PERIOD NOT MET

Contributions: Tax-No, Penalty-No
Conversions: Tax-No, Penalty-Yes (Taxable Portion)
Conversions: Tax-No, Penalty-No (Nontaxable Portion)
Earnings: Tax-Yes, Penalty-Yes

UNDER AGE 59.5
FIVE YEAR CONVERSION HOLDING PERIOD MET

Contributions: Tax-No, Penalty-No
Conversions: Tax-No, Penalty-No (Taxable Portion)
Conversions: Tax-No, Penalty-No (Nontaxable Portion)
Earnings: Tax-Yes, Penalty-Yes

OVER AGE 59.5
LESS THAN FIVE YEARS SINCE OPENING FIRST ROTH IRA

Contributions: Tax-No, Penalty-No
Conversions: Tax-No, Penalty-No (Taxable Portion)
Conversions: Tax-No, Penalty-No (Nontaxable Portion)
Earnings: Tax-Yes, Penalty-No <<<-------------------------

OVER AGE 59.5
FIVE YEARS OR MORE SINCE OPENING FIRST ROTH IRA

All Distributions Are Qualified

No Taxes
No Penalties



If this person does a Roth conversion (first contribution to Roth IRA) in 2020, the Roth IRA will be qualified on 1/1/25, several years earlier than if he/she waits. This may or may not be a benefit - just depends on when/if the money is needed. I cannot see any downside for doing this.

I do not think (but I also do not know) that there would be any affect on a beneficiary. Since a beneficiary may have no way of knowing if a Roth IRA is qualified or not, it would not make sense to me for that to be a factor.

An inherited Roth IRA must be emptied in 10 years under new tax law (this last December I think).
Topic Author
Domadosolo
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Re: Help me Streamline IRAs - Multiple Roths, SEP, Trad

Post by Domadosolo »

retiredjg wrote: Thu Sep 03, 2020 7:32 am
Thank you @retiredjg for your detailed response !
Katietsu
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Re: Help me Streamline IRAs - Multiple Roths, SEP, Trad

Post by Katietsu »

retiredjg wrote: Thu Sep 03, 2020 7:32 am

I do not think (but I also do not know) that there would be any affect on a beneficiary. Since a beneficiary may have no way of knowing if a Roth IRA is qualified or not, it would not make sense to me for that to be a factor.

An inherited Roth IRA must be emptied in 10 years under new tax law (this last December I think).
A beneficiary of a Roth IRA can withdraw contributions tax free. If a Roth IRA has not yet met the 5 year qualification period, the beneficiary will owe income tax (but not a 10% penalty) on a withdrawal of the earnings.
retiredjg
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Re: Help me Streamline IRAs - Multiple Roths, SEP, Trad

Post by retiredjg »

Katietsu wrote: Fri Sep 04, 2020 11:02 pm
retiredjg wrote: Thu Sep 03, 2020 7:32 am I do not think (but I also do not know) that there would be any affect on a beneficiary. Since a beneficiary may have no way of knowing if a Roth IRA is qualified or not, it would not make sense to me for that to be a factor.

An inherited Roth IRA must be emptied in 10 years under new tax law (this last December I think).
A beneficiary of a Roth IRA can withdraw contributions tax free. If a Roth IRA has not yet met the 5 year qualification period, the beneficiary will owe income tax (but not a 10% penalty) on a withdrawal of the earnings.
katietsu, do you remember where you found this information? Never mind, I found it.
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