Comments on: Roth IRA Withdrawal Rules http://cashmoneylife.com/roth-ira-withdrawal-rules/ Money Management, Small Business, Career Wed, 23 May 2012 21:16:10 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: JP http://cashmoneylife.com/roth-ira-withdrawal-rules/#comment-45882 JP Wed, 04 Apr 2012 18:40:20 +0000 http://cashmoneylife.com/?p=2155#comment-45882 fredct you saved the day..... I was having issues with figuring out how to navigate on TAxact to input the basis of my Roth IRA contribution and I found your tips to be spot on. - JP fredct you saved the day…..

I was having issues with figuring out how to navigate on TAxact to input the basis of my Roth IRA contribution and I found your tips to be spot on.

- JP

]]> By: fredct http://cashmoneylife.com/roth-ira-withdrawal-rules/#comment-33813 fredct Fri, 29 Jul 2011 23:39:45 +0000 http://cashmoneylife.com/?p=2155#comment-33813 Jack, If you read my previous post, the 5 year rule only applies to profits (gains) in the Roth. Anything you rolled over would be part of your basis, so that's not really an issue. However, I'm very confused why you want to roll it to a Roth. WHy not just take it from the Traditional when you're ready? By moving it to a Roth, all you're really doing is recognizing the taxes early. Why pay taxes earlier? Jack,

If you read my previous post, the 5 year rule only applies to profits (gains) in the Roth. Anything you rolled over would be part of your basis, so that’s not really an issue.

However, I’m very confused why you want to roll it to a Roth. WHy not just take it from the Traditional when you’re ready? By moving it to a Roth, all you’re really doing is recognizing the taxes early. Why pay taxes earlier?

]]> By: Jack Lee http://cashmoneylife.com/roth-ira-withdrawal-rules/#comment-33795 Jack Lee Thu, 28 Jul 2011 20:13:56 +0000 http://cashmoneylife.com/?p=2155#comment-33795 I am over 70 yrs. old and have "rolled over" monies from my Traditional IRA but would like to move some monies into a Roth IRA. I intend to use it to pay college expenses for my grandchildren which I understand is a "qualified expense". Are such withdrawls subject to the 5 year rule? I am over 70 yrs. old and have “rolled over” monies from my Traditional IRA but would like to move some monies into a Roth IRA. I intend to use it to pay college expenses for my grandchildren which I understand is a “qualified expense”. Are such withdrawls subject to the 5 year rule?

]]> By: Shawn http://cashmoneylife.com/roth-ira-withdrawal-rules/#comment-31385 Shawn Thu, 31 Mar 2011 01:06:21 +0000 http://cashmoneylife.com/?p=2155#comment-31385 My wife and I had this exact same issue. Thanks for posting the steps for taxact.com. My wife and I had this exact same issue. Thanks for posting the steps for taxact.com.

]]> By: fredct http://cashmoneylife.com/roth-ira-withdrawal-rules/#comment-31255 fredct Sun, 27 Mar 2011 13:57:18 +0000 http://cashmoneylife.com/?p=2155#comment-31255 I don't understand your confusion Steve. First, you can only contribute to an IRA if you have earned income (i.e. income from a job). So few 70-year-olds will quality to make an IRA contribution anyhow. Second, what you state would only be true if the 70 year old had never contributed to a Roth at any time if the previous 70 years of their life. Third, the 5-year rule only applies to *profits* on a Roth. You can take out your contributions at any time. Finally, if that's the case - there's a working 70 year old who has never contributed to a Roth before *and* they need all the money (including profits) in less than 5 years , then, yes, a Roth probably doesn't make any sense. I don’t understand your confusion Steve. First, you can only contribute to an IRA if you have earned income (i.e. income from a job). So few 70-year-olds will quality to make an IRA contribution anyhow.

Second, what you state would only be true if the 70 year old had never contributed to a Roth at any time if the previous 70 years of their life.

Third, the 5-year rule only applies to *profits* on a Roth. You can take out your contributions at any time.

Finally, if that’s the case – there’s a working 70 year old who has never contributed to a Roth before *and* they need all the money (including profits) in less than 5 years , then, yes, a Roth probably doesn’t make any sense.

]]> By: Steve Sertell http://cashmoneylife.com/roth-ira-withdrawal-rules/#comment-31187 Steve Sertell Sat, 26 Mar 2011 16:16:02 +0000 http://cashmoneylife.com/?p=2155#comment-31187 My understanding of the ROTH IRA is that one can take money out of it as long as the initial ROTH has been active for over five years and the person is 59 1/2 or older. The actual funds that the money was put into do not need to stay in the ROTH for five years, i.e. the ROTH was opened in 2003 but the individual draws from a mutual fund contribution made in 2008 that is part of the ROTH. That said, it wouldn't seem logical for someone to put money in a ROTH at age 70, if he or she couldn't touch it until they were 75. Where does the truth lie? Thanks. My understanding of the ROTH IRA is that one can take money out of it as long as the initial ROTH has been active for over five years and the person is 59 1/2 or older. The actual funds that the money was put into do not need to stay in the ROTH for five years, i.e. the ROTH was opened in 2003 but the individual draws from a mutual fund contribution made in 2008 that is part of the ROTH. That said, it wouldn’t seem logical for someone to put money in a ROTH at age 70, if he or she couldn’t touch it until they were 75. Where does the truth lie? Thanks.

]]> By: Steve http://cashmoneylife.com/roth-ira-withdrawal-rules/#comment-29331 Steve Sat, 12 Feb 2011 03:32:28 +0000 http://cashmoneylife.com/?p=2155#comment-29331 fredct, Thank you. Your help got me to where I needed to be. Appreciate you taking time to help a fellow tax payer! Let me know if you are ever passing through Keokuk, IA and I'll pick up dinner. Steve fredct,

Thank you. Your help got me to where I needed to be. Appreciate you taking time to help a fellow tax payer!

Let me know if you are ever passing through Keokuk, IA and I’ll pick up dinner.

Steve

]]> By: fredct http://cashmoneylife.com/roth-ira-withdrawal-rules/#comment-29309 fredct Thu, 10 Feb 2011 20:26:37 +0000 http://cashmoneylife.com/?p=2155#comment-29309 Steve, I use taxact, so I just took a look... what you need to do is enter a basis for the IRA. On the Help bar on the right, search for "basis in Roth IRA", without the quotes. The first result will be "FAQ - Roth IRA - Entering Basis of Nonqualified Distributions" and it has step-by-step instructions. They key is that, when entering the 1099-R, check the box that says "taxable amount not determined" (box 2b) and enter "J" as the code in box 7. Then, when you're done, go back to the "Federal Q&A" and under "retirement income" you'll see a choice for "Nondeductible IRA's (Form 8606)" (for you or your spouse). Click it, then Click 'yes' to review, and a couple screens later you'll get to the "Roth IRA Distributions - Basis" screen, where you can enter your basis. Form 8606 it the one that has this information. If you can't follow my instructions, the Help should be more detailed. I admit that TaxAct isn't quite as friendly as I'd like (it should really give you that option without going back to the Form 8606), but it's much cheaper than the others, so I'm willing to dig into the help to get the answer. I'd also suggest giving them feedback on this... I've had a lot of luck with them implementing changes of mine the following year. Steve, I use taxact, so I just took a look… what you need to do is enter a basis for the IRA.

On the Help bar on the right, search for “basis in Roth IRA”, without the quotes. The first result will be “FAQ – Roth IRA – Entering Basis of Nonqualified Distributions” and it has step-by-step instructions.

They key is that, when entering the 1099-R, check the box that says “taxable amount not determined” (box 2b) and enter “J” as the code in box 7.

Then, when you’re done, go back to the “Federal Q&A” and under “retirement income” you’ll see a choice for “Nondeductible IRA’s (Form 8606)” (for you or your spouse). Click it, then Click ‘yes’ to review, and a couple screens later you’ll get to the “Roth IRA Distributions – Basis” screen, where you can enter your basis. Form 8606 it the one that has this information.

If you can’t follow my instructions, the Help should be more detailed.

I admit that TaxAct isn’t quite as friendly as I’d like (it should really give you that option without going back to the Form 8606), but it’s much cheaper than the others, so I’m willing to dig into the help to get the answer.

I’d also suggest giving them feedback on this… I’ve had a lot of luck with them implementing changes of mine the following year.

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