Replenishing Roth IRA
Client has 7 year old Roth IRA with contributions thru 2011 of $30,000. He needs $25,000 from the account and would like to take a distribution of his contributions. His intent is to replenish the account completely within 60 days. Are there any repercussions from this transaction? Does he keep his same level of contributions in future years if this is replenished? Any tax consequences that I’m not thinking thru? Thanks!
Permalink Submitted by Alan Spross on Mon, 2012-01-09 20:59
Any amount distributed from an IRA does not affect taxes or the status of the plan itself if rolled over or back within 60 days. The only affect on the IRA is that the one allowed rollover in a 12 month period has been used up, and you cannot do another rollover for the next 12 months. Other than that and the loss of earnings while the funds are NOT in the IRA, it has no affect.
Client will still have satisfied the 5 year holding period, and when he reaches 59.5 the Roth will be fully tax free as before. The only risk is that if the funds cannot be replaced within 60 days, the funds will no longer be in the Roth. But the return of actual Roth contributions is tax and penalty free.