Hello,
1. I would appreciate a confirmation from folks about my last question above when you get a chance.
2. Now, the whole reason I have been trying to understand all this is because I was wondering if I can avoid having to contribute to a 529 plan for kids college, if I can really just withdraw from Roth IRA at the time of need, without having to pay any taxes or penalties. It appears now that Roth IRA might be an OK option too even if I do not do any 529.
I would also like to avoid potentially nightmarish accounting for the Roth IRA when it comes time to withdraw. So, I would request feedback on the following approach that I am now considering:
2010-2015: I had made direct contributions to Roth IRA, call this IRA 1.
2016-2023: I made backdoor Roth contributions to another Roth IRA, call this IRA 2. In hindsight, it seems I was lucky having this separate IRA as it could make the accounting simpler.
Suppose I will need to start withdrawing money in 2035 for kid college, and I will NOT be above 59 1/2 at that time. So,
2024-2030 (i.e., till 5 years before 2035): I will continue to make backdoor Roth contributions to IRA 2.
2031 onwards: I can open a new Roth IRA 3 to keep making backdoor Roth contributions.
In 2035, when it is time to start withdrawing, suppose:
IRA1: Total balance T1; Contributions C1; Earnings E1. (T1 = C1+E1)
IRA2: Total balance T2; Contributions C2; Earnings E2. (T2 = C2+E2)
So, in 2035, I would be able to withdraw the entire T2 and also C1; both of these without having to pay any taxes or penalties. Could you please confirm this ?
(I would probably not withdraw this entire amount in 2035 itself, but split it over say 2035-2038. The balance T2 in IRA 2 would fluctuate over these years, but I could keep withdrawing from it without any taxes/penalties, after having withdrawn the amount C1 from IRA 1.)
(And say in 2045 when I turn 60, I can withdraw whatever I want from whichever IRA without any penalty/taxes at all, right ?)
Thanks a lot for your help.
1. I would appreciate a confirmation from folks about my last question above when you get a chance.
2. Now, the whole reason I have been trying to understand all this is because I was wondering if I can avoid having to contribute to a 529 plan for kids college, if I can really just withdraw from Roth IRA at the time of need, without having to pay any taxes or penalties. It appears now that Roth IRA might be an OK option too even if I do not do any 529.
I would also like to avoid potentially nightmarish accounting for the Roth IRA when it comes time to withdraw. So, I would request feedback on the following approach that I am now considering:
2010-2015: I had made direct contributions to Roth IRA, call this IRA 1.
2016-2023: I made backdoor Roth contributions to another Roth IRA, call this IRA 2. In hindsight, it seems I was lucky having this separate IRA as it could make the accounting simpler.
Suppose I will need to start withdrawing money in 2035 for kid college, and I will NOT be above 59 1/2 at that time. So,
2024-2030 (i.e., till 5 years before 2035): I will continue to make backdoor Roth contributions to IRA 2.
2031 onwards: I can open a new Roth IRA 3 to keep making backdoor Roth contributions.
In 2035, when it is time to start withdrawing, suppose:
IRA1: Total balance T1; Contributions C1; Earnings E1. (T1 = C1+E1)
IRA2: Total balance T2; Contributions C2; Earnings E2. (T2 = C2+E2)
So, in 2035, I would be able to withdraw the entire T2 and also C1; both of these without having to pay any taxes or penalties. Could you please confirm this ?
(I would probably not withdraw this entire amount in 2035 itself, but split it over say 2035-2038. The balance T2 in IRA 2 would fluctuate over these years, but I could keep withdrawing from it without any taxes/penalties, after having withdrawn the amount C1 from IRA 1.)
(And say in 2045 when I turn 60, I can withdraw whatever I want from whichever IRA without any penalty/taxes at all, right ?)
Thanks a lot for your help.
Statistics: Posted by esipsi — Mon Mar 04, 2024 3:42 am — Replies 32 — Views 2792
