We have been following a non-deductible Roth strategy. Contribute $6500 to a Traditional IRA but get no tax deduction. Then convert a few months later to a Roth at almost no tax liability.

Did this in 2016, the year 70.5, when you cannot make IRA contributions.

How do we unwind this because two steps and gains are involved. Of course, this happened in February 2016 when the market was very low and so now the contribution has grown substantially.

I think the necessary steps start like this…
1 – pull the $6500 out of the Roth back to the Trad IRA
2 – pull the $6500 out of the Trad IRA (or should we skip this and go direct from Roth back to joint/taxable?)
3 – pay 6% penalty on contribution that should not have been made (6500 x 0.6 = $390)

Lets say the $6500 grew by 20% since Feb 2016, which is $1300. How does the excess gain factored?

Any corrections or guidance on the gain? Thanks for your help!