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I have read through pub 590 and can't find an answer....

Background: I have a rollover IRA (from a 401k) at Vanguard that contains both taxable and non taxable components. I realize that when I eventually withdraw from this IRA, each dollar withdrawn must be prorated into taxable / non-taxable components. Then I file form 8606 each year to keep the IRS (and me) aware the IRA's ongoing tax basis.

I am now planning a rollover of a lump sum pension distribution and the question I am facing is
1) to roll it into the existing rollover IRA at Vanguard or
2) roll it into a new separate IRA somewhere else.
This rollover IRA would consist 100% of pretax money.

By not rolling the pension money into the existing Vanguard, I will maintain a higher percentage of after tax money in that specific IRA.
My thinking is that when retirement withdrawals begin there would be an advantage to pull from the mixed account at Vanguard where a prorated part of the withdrawal would be after tax dollars.

So my questions is - will this work? Or would the IRS treat both IRA's as one giant IRA for sake of basis reporting and prorating taxable / nontaxable withdrawal percentages?

Thanks, mike
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