Transferring Roth IRA's to another brokerage

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
lgb
Posts: 288
Joined: Fri Mar 01, 2019 8:46 am

Transferring Roth IRA's to another brokerage

Post by lgb »

Spouse and I have 2 ROTH IRA's of ours that were opened in 2012 with say $2,000 each to begin with. We contributed a little bit to that the first couple years and then our income increased to where we could no longer contribute. They've grown to about $15,000 each, to date. I believe the original cost basis is about $19,000 Total between the two (I could be wrong, for some reason this is top secret information to make readily available from their online website mystreetscape - which is horrible in my opinion) and they have a total value of say $30,000 between the two ROTH IRA's.

After reviewing all of our investment accounts with expense fee's and what not, and since then we've got much more Investments with Fidelity and I'm more familiar now with the Fidelity site. I'm considering moving these two ROTH IRA's over to Fidelity. Driving the interest to do this is that these two ROTH IRA's are with Prudential presently and they have the highest expense fee's of all our investment accounts. They are at about 1% each when they are in Funds that just shouldn't warrant that type of expense. I know I could move it to other Funds that have a less expense, but it isn't just that - it is having to deal with a different representative, separate logins, poor website etc... (however they have been performing consistent with other stuff)

So my question is - we thought that if we were to transfer (?) these 2 ROTH IRA's over to Fidelity from Prudential, that it would start the clock over to be able to pull funds out if we needed to. Say for College expenses or some other expense that came up. Some sort of 5-Year rule where you couldn't touch the gains without penalty? Not sure - just have some lingering thought there was something like that.

Is there any other concerns like Taxes or something? Spouse is just concerned that if we transfer them over to Fidelity that it will handcuff us from being able to access those funds somehow - as we do have kids in college and going to be in college over the next 4-5 years. One of the reasons we were suggested to open these was because of the tax advantage of the ROTH, but also that it could be used for kids college expenses as one other option.

Any thoughts or suggestions for us?
User avatar
Eagle33
Posts: 2392
Joined: Wed Aug 30, 2017 3:20 pm

Re: Transferring ROTH IRA's to another brokerage

Post by Eagle33 »

Find & download the 2 statements documenting the initial funding for each Roth IRA at Prudential. The 5-year Roth IRA clock on having an Roth IRA begins when you open your first Roth IRA. Your wife has her own 5-year clock when her first Roth IRA was initially funded. Those clocks are satisfied after 5-years from the initial funding even if you move the accounts to another brokerage. The Roth IRA distribution rules stay the same.

Now contact Fidelity and have them help you setup 2 Roth IRA there and then have them begin the direct transfer from Prudential for you.
Topic Author
lgb
Posts: 288
Joined: Fri Mar 01, 2019 8:46 am

Re: Transferring ROTH IRA's to another brokerage

Post by lgb »

Unfortunately Prudential only allows you to go back it seems 5-years and these were funded in I thin 2012 and we opened them together at the same time, so we're well past the 5-year initial funding period you mention. So that is good news!

If transferring to another brokerage doesn't actually re-start anything - then it seems like it should be trivial to get with Fidelity to initiate this.

I wonder if that early Statement might be needed to know the initial values will be needed for Fidelity to initiate this (as in I will need to reference something that is on that statement like the initial amount of something)?

I also wonder - you mention the ROTH IRA distributions remain the same .... is there a brief summary of that?

Having Fidelity initiate it will be nice, as then we don't have to get wooed into leaving it alone by discussing it with our Prudential person (not that they are bad - pretty good and considerate person - just happens to be working for a company that should stick to insurance, it is just they are not even in the same city as us (long story)). We can just kind of do it and move on.
placeholder
Posts: 8421
Joined: Tue Aug 06, 2013 12:43 pm

Re: Transferring ROTH IRA's to another brokerage

Post by placeholder »

Generally the irs considers you have just one roth ira so the "clock" isn't affected by transferring.
Flyer24
Posts: 5233
Joined: Sun Apr 08, 2018 4:21 pm

Re: Transferring Roth IRA's to another brokerage

Post by Flyer24 »

Just for reference, you only capitalize the first letter in “Roth”. It refers to Senator William Roth. I adjusted your title.
Alan S.
Posts: 12669
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Transferring Roth IRA's to another brokerage

Post by Alan S. »

lgb wrote: Fri Jun 18, 2021 9:48 pm Unfortunately Prudential only allows you to go back it seems 5-years and these were funded in I thin 2012 and we opened them together at the same time, so we're well past the 5-year initial funding period you mention. So that is good news!

If transferring to another brokerage doesn't actually re-start anything - then it seems like it should be trivial to get with Fidelity to initiate this.

I wonder if that early Statement might be needed to know the initial values will be needed for Fidelity to initiate this (as in I will need to reference something that is on that statement like the initial amount of something)?

I also wonder - you mention the ROTH IRA distributions remain the same .... is there a brief summary of that?

Having Fidelity initiate it will be nice, as then we don't have to get wooed into leaving it alone by discussing it with our Prudential person (not that they are bad - pretty good and considerate person - just happens to be working for a company that should stick to insurance, it is just they are not even in the same city as us (long story)). We can just kind of do it and move on.
If you have a statement copy for any year prior to 2017, that will suffice in documenting the 5 year holding period per spouse.

However, the Roth custodians do not track your Roth IRA basis or determine the taxable portion of any distributions, so you do need to do that yourself determine how much each spouse has contributed for regular contributions, and the year and amount of each conversion as well as the taxable portion of each conversion. The taxable portion of each conversion should show on Form 8606 for any year a spouse converted.

Make sure your beneficiaries are documented correctly on the new Roth accounts.
Topic Author
lgb
Posts: 288
Joined: Fri Mar 01, 2019 8:46 am

Re: Transferring ROTH IRA's to another brokerage

Post by lgb »

placeholder wrote: Fri Jun 18, 2021 10:11 pm Generally the irs considers you have just one roth ira so the "clock" isn't affected by transferring.
This will help convince the reluctant spouse! :happy
Topic Author
lgb
Posts: 288
Joined: Fri Mar 01, 2019 8:46 am

Re: Transferring Roth IRA's to another brokerage

Post by lgb »

Flyer24 wrote: Fri Jun 18, 2021 10:22 pm Just for reference, you only capitalize the first letter in “Roth”. It refers to Senator William Roth. I adjusted your title.
You should see me in real life with emails and text! or better yet, my notes I hand write in my work notebook! You won't know where to begin or how to stop! Thanks! :sharebeer
User avatar
Eagle33
Posts: 2392
Joined: Wed Aug 30, 2017 3:20 pm

Re: Transferring ROTH IRA's to another brokerage

Post by Eagle33 »

lgb wrote: Fri Jun 18, 2021 9:48 pm I also wonder - you mention the ROTH IRA distributions remain the same .... is there a brief summary of that?
See the "Treatment of distributions" table in the Notes section of wiki Roth IRA page.
User avatar
ruralavalon
Posts: 26353
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Transferring Roth IRA's to another brokerage

Post by ruralavalon »

Just have Fidelity handle the rollovers of the Roth IRAs.

There is no downside to this.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Post Reply