Splitting ROTH into 2 ROTHS
Hello,
It is my understanding that direct contributions to a ROTH can be withdrawn penalty and tax free at any time. What happens to the contributions when a ROTH is split into two different ROTHs?
For example, I have one ROTH that has a current balance of $25,000 ($15,000 of earnings and $10,000 of contributions). If I split that ROTH into two separate ROTHs $12,500 and $12,500 do the contributions travel to each account pro rata? For example, that would be $12,500 balance ($7,500 earnings and $5,000 contributions) or can I elect that all $10,000 contributions go to one of the ROTHs.
Thank you!
Permalink Submitted by Alan - IRA critic on Wed, 2017-05-17 00:00
Your Roth accounts are treated as one combined account no matter how many you have. Therefore, no matter how you split up your single Roth IRA, when you take a distribution up to 10,000 it will be treated as coming from your regular contribution balance, regardless of which Roth IRA you take the distribution from. Therefore, splitting the Roth up will not change anything with respect to taxation or reporting of distributions. There are no elections do be made or that can be made. These rules are referred to as the ordering rules for Roth IRA distributions.