Author Topic: Roth IRA Distribution question  (Read 2025 times)

Crystal1588

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Roth IRA Distribution question
« on: November 28, 2015, 07:22:57 PM »
My husband and I were discussing Roth IRAs and a question came up.

If you have an IRA through Vanguard and a portion of it is a rollover from a previous job's 401k, how do qualified distributions work?

Example:
In September, 2014, you have $10,000 in a Vanguard Roth IRA.  The account has been open for more than 5 years and all contributions are at least 5 years old.  Separately, you have $21,000 in a ROTH 401k through your job.  You leave that job and roll over the 401k into your Vanguard Roth IRA.  Is the rollover all considered contributions? Or is it considered earnings and you have to wait 5 years to withdraw it penalty free?  Would you be able to withdraw the entire $31,000 or just the $10,000 that was originally in the account before the rollover?

This is hypothetical and we're not planning on withdrawing any money, I just can't seem to find the answer online.
Any input?

MrMoogle

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Re: Roth IRA Distribution question
« Reply #1 on: November 30, 2015, 01:25:55 PM »
I'm in this situation too, so I'm commenting to follow.

MDM

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Re: Roth IRA Distribution question
« Reply #2 on: November 30, 2015, 02:00:26 PM »

seattlecyclone

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Re: Roth IRA Distribution question
« Reply #3 on: November 30, 2015, 04:45:10 PM »
Take a look at this page. It indicates that amounts rolled over from a Roth 401(k) that were treated as "investment in the contract" (i.e. contributions) will be considered contributions for the purpose of Roth IRA ordering rules. The remainder of the Roth 401(k) rollover balance would be treated the same as Roth IRA earnings.

Spork

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Re: Roth IRA Distribution question
« Reply #4 on: November 30, 2015, 05:11:19 PM »
I'm somewhat in this situation as well.... and the Roth 401k is badly documented.  It bounced from company to company while I was working and the final rollover when I FIRE'd didn't have any separation of "contributions" vs "earnings".  Since I'm FIRE'd, I no longer have access to the last Roth 401k administration web site.

I've basically decided to quarantine the rollover amount and just not consider it.  It isn't a huge portion of the Roth balance.  I'll start my Traditional->Roth conversion ladder in 2016 and just won't worry about the 401k portion until I'm 59.5 (which isn't THAT far away.)