Roth holding periods
I am 71 years old.
I have two ROTH IRA accounts. The first (account A) is a combination of ROTH contributions and Roth conversions. Over the years, there have been many contributions and conversions that have been merged into this account. The first contribution was made in 1998 and the last conversion was 2008. The second account ( account B) is a ROTH conversion made in 2209. My questions are….
1. when is the 5 year holding period over for account A (both contributions, conversions and earnings)?
2. If I merge account B into account A do I restart the holding period?
3. If the answer to question 2 is yes, then should I keep any further conversions separate from account A and B?
On pages 227 and 228 in the “Retirement Savings Time Bomb” book, my questions a partially answered if you are under 59 1/2, but not if you are older.
Last question, by combining contributions and conversions have I created an income tax accounting nightmare for whoever withdraws from account A .
Permalink Submitted by Alan Spross on Tue, 2010-03-16 20:02
1. when is the 5 year holding period over for account A (both contributions, conversions and earnings)?
Holding periods are not assigned to particular accounts. Since your first Roth contribution was in 1998, and that was also around the time you were 59.5, all your Roth accounts were probably fully qualified in 2003. Since that time any distributions would be fully tax and penalty free. This includes conversions that you have just made as well.
2. If I merge account B into account A do I restart the holding period?
No. There is no reason not to combine the accounts. Nothing you do now would restart any holding period.
3. If the answer to question 2 is yes, then should I keep any further conversions separate from account A and B?
Not applicable. But you probably should still make any new conversions into new Roth accounts if there is any chance you might want to recharacterize them. After the recharacterization deadline has passed, you could then add the accounts to your main Roth account.
Re your last question, since your Roth is long since fully qualified, there is no longer any need to account for amounts of contributions, conversions or earnings. It is all just one large pot of fully tax free funds, and of course there are NO RMDs required.