Within the 400-page Ed Slott advisor training manual, we include a basic chart that outlines the Roth IRA distribution ordering rules and the availability of those specific dollars. When presenting the material to a live audience, I always say it is my favorite page. Those in the crowd usually joke and ask incredulously, “You have a favorite page in this book?”
Yes. For such a simple graph, I think it will get a person through 95% of all Roth IRA distribution questions (and that percentage might be low). In fact, I keep the chart on my computer desktop and have shared it with so many people I lost count. The Slott Report format precludes me from sharing the actual chart, but I can share the words on it. Some key items I always mention during our training programs before discussing the chart:
Keep it simple.
And now, the words on my favorite chart…
Roth IRA Distribution Ordering Rules
1. Contributions. No tax. No penalty.
2. Conversions. No tax. No penalty if distributed after 5 years OR distributed after age 59 ½.
3. Earnings. No tax or penalty if distributed after 5 years AND 59 ½.
By Andy Ives, CFP®, AIF®
Ed Slott and Company, LLC
To read more of our blog articles, click here.
Christian Cordoba, founder of California Retirement Advisors, has been a member of Ed Slott's Master Elite IRA Advisor Group since 2007.