I am 61 years old and can withdrawal from my Roth IRA tax free with money that has been there for over 5 years. I want to make a contribution to add money to buy a certain stock. I don’t want to use the cash in my account because I use it to trade options for extra income.
So how do I separate cash I can withdrawal tax free verses the new money added to account that will be within the 5 year rule and therefore taxable.
So I want to still be able to withdrawal money tax free without using the newly added money. Hope this makes sense.
“So how do I separate cash I can withdrawal tax free verses the new money added to account that will be within the 5 year rule and therefore taxable.”
“Money” in a retirement account does not have an “identity.” Every dollar of value is the same. You can’t point to any dollar of cash or value and say when it was contributed.
The IRS has ordering rules for withdrawals in IRS Pub 590-B.
Order the distributions as follows.
1. Regular contributions.
2. Conversion and rollover contributions, on a first-in,
first-out basis (generally, total conversions and roll-
overs from the earliest year first). See Aggregation
(grouping and adding) rules, later. Take these conver-
sion and rollover contributions into account as follows:
a. Taxable portion (the amount required to be inclu-
ded in gross income because of the conversion or
rollover) first, and then the
b. Nontaxable portion.
3. Earnings on contributions.
Understand that this has to do with the accounting of contributions and conversions not the actual cash.
Let’s say you contributed $5,000 to your Roth IRA and the IRA is now worth $8,153.
If you withdraw $4,000, your IRA will then have $1,000 of contribution and $3,153 of growth left in the IRA.
Question: Why are you withdrawing funds and also adding funds?
I am 61 years old and can withdrawal from my Roth IRA tax free with money that has been there for over 5 years
Think of it this way…
When you’ve contributed to and held a Roth IRA for at least 5 years AND you’ve attained at least age 59.5, ALL of the value of the Roth may be withdrawn tax free at any time for any reason. It is referred to as a ‘qualified withdrawal’
Are you or your spouse still working and have earned (employment) income? If not, you may not make a direct contribution to your Roth IRA, as the IRS requires that you have in earned income at least the amount of you + your spouse’s IRA contribution. However, you may do a ‘conversion contriibution’ from a traditional IRA to your Roth IRA at any age whether you have earned income or not.
Question: Why are you withdrawing funds and also adding funds?
I want to purchase additional shares of a stock I own, but I don’t want to use the available cash in my account because I Trade options for extra income with that cash and withdrawal those profits.
“I want to purchase additional shares of a stock I own, but I don’t want to use the available cash in my account because I Trade options for extra income with that cash and withdrawal those profits.”
If you are contributing new money from wages you are earning to the Roth IRA, why are you withdrawing profits from the Roth IRA?
If the money is in the Roth IRA, why not leave it there? Once it is out you can’t put it back in.
If you are retired and not earning wages, commissions, self-employed, etc, you can’t contribute to an IRA.
I just am not following what you are doing and why.