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Subject:  5-Year Tax Rules for Roth IRA's Date:  1/26/1998  1:37 AM
Author:  TMFBogey Number:  1527 of 127549

Regarding the 5-Year Tax rules, TMF Taxes writes:

Complicated? You bet. I told you in our first installment on this issue that it has turned into a monster. And it gets even more complicated when you combine regular Roth IRA contributions with Roth IRA rollover accounts. I have read complaints from many of you in the Tax Strategies folder about your broker "forcing" you to open separate accounts for Roth IRA rollovers, contributions, etc. You should know that the broker is simply following an IRS recommendation officially directed to all Roth IRA trustees. And while separate accounts may cost you additional amounts for annual administrative fees, set up fees, etc., it very well may be in your best interest to set up these separate accounts unless and until you fully understand the Roth IRA distribution and penalty rules.

If you feel confident that you understand the rules, and want to combine all of your Roth IRA accounts (contributions and/or rollover accounts), ask your broker for a "waiver" of the separate account requirements. Usually, the broker will comply with your wishes to maintain a single Roth IRA account once you execute this waiver (holding the broker harmless for any tax or penalties you may incur in the future).

But please, BEFORE you execute this waiver, make sure that you understand exactly what you are doing, and what the impact of combining your accounts might mean to you in the form of taxes and penalties. Treat the waiver like a loaded gun: only to be handled by those with the appropriate knowledge, training, and experience.

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