Pro-rata rule for withdrawing tax-free roth dollars from Traditional IRA

[Lstansbury]

Thank you to Rayvt for posting insights about proration rules when withdrawing aftertax contributions from a traditional IRA. It was a 2017 post, but seems very relevant still today for many and I definitely have a question, so figured, why not open a new thread

Background: A slightly sleezy salesman at my Uni convinced me to put my Roth contribution into TIAA Cref. Reason was I could get a guaranteed 3% return. ( My university is making the guarantee.) Cool for the stable portion of my portfolio.

BUT....although it is labeled a "roth" contriubtion on my statement, the funds are being held jointly in an older Traditional IRA I just so happened to already have open. So the entire account's name is TIAA Traditional IRA.

When I questioned the salesman, he said "oh, I checked and I was told they just have to mix the funds like that."

Now I'm reading about the proration on withdrawals from Rayvt? Here's a link to an eye opening situation
https://www08.wellsfargomedia.com/a...rement/taxes-and-retirement/pro-rata-rule.pdf

So my questions is -- Does anyone else have experience with this? I.e., just because my after Tax roth contribution was lumped into a Traditional Pre-Tax IRA account, do you think that might be considered subject to the prorata or "cream in your coffee" rule?

Thanks for any additional insights. I'm kinda' getting ill thinking about how I have been bilked by this guy.

 

[gauss]

Did you receive form 5498 in the mail around May the year after you made your contributions? If so, this should document how it is being reported to the IRS (IRA contribution vs Roth IRA contribution.) It seems like this would be the first thing to sort out. BTW, If you don't have the 5498s, you can get up to 10 years of them from the IRS by requesting "Wage & Income" transcripts.

If you have nondeuctible (ie after-tax) contributions to an IRA, in general you will have a problem if you wish to separate them (ie 'cream in the coffee rule').

If you have access to a tradititional 401k plan that will accept inbound rollovers from traditional IRA's then you may be able to remedy this. Google "isolate the basis" for further details.

-gauss