0

I am considering pulling out some of my contributions that I made to my roth IRA to pay for some storm damage from hurricane Helene, but I am slightly confused.

Does the 5 year rule restart when you rollover from an employer 401K to an IRA or exchange money between different funds? Or does the the 5 year rule start when I first made a Roth contribution to my TSP years ago when I was in the military?

Also, I believe that I have the option to make a qualified disaster distribution because I am in a Disaster zone for Hurricane Helene. Would it be more beneficial to take this route over just withdrawing contributions (I cant find my 5498's and would be going off box 5 from 1099's about contributions)? If I do take a qualified disaster distribution from my rollover Roth IRA the IRS page says that I can repay the money I don't use back to ANY retirement plan. Does that include into my civilian TSP, that wont let me rollover my roth IRA?

Is there anything special I have to do to make a qualified disaster distribution; fill out a form or make a request? Or do I simply make a withdraw and decline to pay taxes on it then fill out information come tax time?

If I take a qualified disaster distribution from my roth I do not believe that I have to pay taxes on it, it will just count as income on the next few years correct? Is the that same deal as if I take out my contributions?

Is there anything else I am not thinking of between these to or any other options I have to pay for some storm damage that insurance is not paying for?

Of course I would rather let my Roth IRA build and not take any withdraw, but I don't think that is an option right now. Also if I can use this situation as a way to get the remainder of what I don't use of my rollover roth IRA into my roth TSP that would be preferable. Even though I am sure the no rollover rth IRA's into TSP rule will still apply as it seems like its consider a normal rollover at that point.

Thank you in advance any insight would be helpful

user158412
  • 1

1 Answers1

0

Does the 5 year rule restart when you rollover from an employer 401K to an IRA or exchange money between different funds? Or does the the 5 year rule start when I first made a Roth contribution to my TSP years ago when I was in the military?

See the 26 CFR 1.408A-6, A-2:

A-2. The 5-taxable-year period described in A-1 of this section begins on the first day of the individual's taxable year for which the first regular contribution is made to any Roth IRA of the individual or, if earlier, the first day of the individual's taxable year in which the first conversion contribution is made to any Roth IRA of the individual. The 5-taxable-year period ends on the last day of the individual's fifth consecutive taxable year beginning with the taxable year described in the preceding sentence.

TSP is not an IRA. So the 5 year clock starts with the first rollover or conversion from your TSP/401k/Traditional IRA into the Roth IRA.

Also, I believe that I have the option to make a qualified disaster distribution because I am in a Disaster zone for Hurricane Helene. Would it be more beneficial to take this route over just withdrawing contributions

If that option is available for you and you want to withdraw, it would allow withdrawing earnings as qualified distributions, not just contributions. Which means you'll be able to withdraw more contributions without penalty later if such a need arises. However, the IRS doesn't currently list hurricane Helene as one of the qualifying disasters.

Is there anything special I have to do to make a qualified disaster distribution; fill out a form or make a request?

You'll need to ask the IRA custodian. If you're confident in your position, you can correct incorrect reporting on your tax return. But, if the 1099-R doesn't have the correct distribution code, you may need to have some explaining to do with the IRS.

Even though I am sure the no rollover rth IRA's into TSP rule will still apply as it seems like its consider a normal rollover at that point.

Yes, it would be an indirect rollover, and you can only do one of those in a 365 days period.

littleadv
  • 190,863
  • 15
  • 314
  • 526