Ordering Rules


DEFINITION of 'Ordering Rules'

The order in which Roth IRA assets are distributed. Assets are distributed from a Roth IRA in the following order:

1. IRA participant contributions
2. Taxable conversions
3. Non-taxable conversions
4. Earnings

BREAKING DOWN 'Ordering Rules'

This set of rules is used to determine the applicable tax treatment of a nonqualified Roth IRA distribution.

Under the aggregation and ordering rules, all of an individual's Roth IRAs are treated as a single account.

  1. Qualified Distribution

    Distributions made from a Roth IRA that are tax and penalty free. ...
  2. In-Service Withdrawal

    A withdrawal made from a qualified plan account before the holder ...
  3. IRA Adoption Agreement And Plan ...

    A contract between the owner of an individual retirement account ...
  4. Individual Retirement Account - ...

    An investing tool used by individuals to earn and earmark funds ...
  5. Non-Qualified Distribution

    1) A distribution from a Roth IRA that occurs before the Roth ...
  6. Roth IRA Conversion

    A reportable movement of assets from a Traditional, SEP or SIMPLE ...
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  1. Is my non-qualified Roth IRA distribution subject to taxes or early distribution ...

    The ordering rules must be applied to determine whether the distribution is subject to income taxes and/or the early distribution ... Read Full Answer >>
  2. How can I determine if a longevity annuity is right for me?

    A longevity annuity may be right for an individual if, based on his current health and a family history of longevity, he ... Read Full Answer >>
  3. How does a Roth IRA grow over time?

    Your Roth IRA account grows over time thanks to two funding sources: contributions and earnings. While your contributions ... Read Full Answer >>
  4. Can my 401(k) be seized or garnished?

    As long as your retirement funds are held in your 401(k) and you do not take them as distributions, your 401(k) cannot be ... Read Full Answer >>
  5. Can my IRA be taken in a lawsuit?

    Whether your IRA can be taken in a lawsuit depends largely on your state of residence and the judgment in question. There ... Read Full Answer >>
  6. Are mutual funds considered retirement accounts?

    Unlike a 401(k) or Individual Retirement Account (IRA), mutual funds are not classified as retirement accounts. Employers ... Read Full Answer >>

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