Roth Rollovers

[Deleted]

I started converting to Roth this year and did a rollover within Fidelity. It is my understanding that each Rollover has a 5 year’s timeframe where you can’t touch the assets for 5 years.

Question: If one does the rollover for few years, how do you keep track of each year assets so you don’t touch the assets that are less than 5 years old. Obviously we will get dividends, capital gains etc. each year. Do you open a new Roth account each year to keep things separate or is there a better method.

[Deleted]

Dec 14, 2022 21:48:37 GMT @jovan said:

I started converting to Roth this year and did a rollover within Fidelity. It is my understanding that each Rollover has a 5 year’s timeframe where you can’t touch the assets for 5 years.

Question: If one does the rollover for few years, how do you keep track of each year assets so you don’t touch the assets that are less than 5 years old. Obviously we will get dividends, capital gains etc. each year. Do you open a new Roth account each year to keep things separate or is there a better method.

It's called a conversion not a rollover, and the 5-year clock begins with the date of your initial Roth IRA. Read the rules on the IRS website.

[Deleted]

Dec 14, 2022 23:43:14 GMT @haven said:

Dec 14, 2022 21:48:37 GMT @jovan said:

I started converting to Roth this year and did a rollover within Fidelity. It is my understanding that each Rollover has a 5 year’s timeframe where you can’t touch the assets for 5 years.

Question: If one does the rollover for few years, how do you keep track of each year assets so you don’t touch the assets that are less than 5 years old. Obviously we will get dividends, capital gains etc. each year. Do you open a new Roth account each year to keep things separate or is there a better method.

It's called a conversion not a rollover, and the 5-year clock begins with the date of your initial Roth IRA. Read the rules on the IRS website.

You are correct it is Roth Conversion. My question still stands ! Question I am asking has nothing to do with IRS rules. Question is how to best keep track of yearly conversions. 

[Deleted]

Dec 14, 2022 23:59:50 GMT @jovan said:

Dec 14, 2022 23:43:14 GMT @haven said:

It's called a conversion not a rollover, and the 5-year clock begins with the date of your initial Roth IRA. Read the rules on the IRS website.

You are correct it is Roth Conversion. My question still stands ! Question I am asking has nothing to do with IRS rules. When you do a Roth Conversion your 5 year time starts with each conversion. This conversion each year is NOT tied to your initial Roth account to my knowledge.  Question is how to best keep track of yearly conversions so you don't touch them before 5 years. If these conversions were tied to your initial ROTH account then I would not be asking this question. 

[gman57]

No matter what date you convert to the IRS it looks like Jan 1. So if you convert 6/6/22 to the IRS your 5 yr clock starts 1/1/22.

I have a simple excel sheet, just making the following numbers up:

2015 -- 20k converted available 1/1/2020
2016 -- 100k converted available 1/1/2021
2017 -- 30k converted available 1/1/2022

Simple to track, I actually track conversions, balance plus conversions, year end balance and what I've withdrawn per year.

I really haven't paid attention to the 5yr rule on my withdrawals. I can't see them being able to track everyone's five year rules until they make a law making companies track it like they now track cost basis on everything. Ah the bane of progress/computers... easier to track stuff, even stuff you might not want tracked.

ADD: actually I amend my previous statement... they are starting to track more of this type info on form 8606 but not sure they're ready for prime time yet. 

[Deleted]

Dec 15, 2022 0:07:03 GMT @jovan said:

Dec 14, 2022 23:59:50 GMT @jovan said:

You are correct it is Roth Conversion. My question still stands ! Question I am asking has nothing to do with IRS rules. When you do a Roth Conversion your 5 year time starts with each conversion. This conversion each year is NOT tied to your initial Roth account to my knowledge.  Question is how to best keep track of yearly conversions so you don't touch them before 5 years. If these conversions were tied to your initial ROTH account then I would not be asking this question. 

The custodian will send you a 1099-R, and you have to report the information on your tax return. Sounds like you should have a tax accountant prepare your taxes. 

[Deleted]

Dec 15, 2022 0:35:49 GMT gman57 said:

No matter what date you convert to the IRS it looks like Jan 1. So if you convert 6/6/22 to the IRS your 5 yr clock starts 1/1/22.

I have a simple excel sheet, just making the following numbers up:

2015 -- 20k converted available 1/1/2020
2016 -- 100k converted available 1/1/2021
2017 -- 30k converted available 1/1/2022

Simple to track, I actually track conversions, balance plus conversions, year end balance and what I've withdrawn per year.

I really haven't paid attention to the 5yr rule on my withdrawals. I can't see them being able to track everyone's five year rules until they make a law making companies track it like they now track cost basis on everything. Ah the bane of progress/computers... easier to track stuff, even stuff you might not want tracked.

ADD: actually I amend my previous statement... they are starting to track more of this type info on form 8606 but not sure they're ready for prime time yet. 

You are correct, we have to file form 8606 to report Roth Conversions each year.