Ordering Rules

AAA

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

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Roth IRA

    An individual retirement plan that bears many similarities to ...
  2. In-Service Withdrawal

    A withdrawal made from a qualified plan account before the holder ...
  3. Triggering Event

    1. A tangible or intangible barrier or occurrence that, once ...
  4. Individual Retirement Account - ...

    An investing tool used by individuals to earn and earmark funds ...
  5. IRA Adoption Agreement And Plan ...

    A contract between the owner of an individual retirement account ...
  6. Spousal IRA

    A type of individual retirement account that allows a working ...
Related Articles
  1. Taxes

    Tax Treatment Of Roth IRA Distributions

    Learn the requirements for withdrawing funds tax and penalty free.
  2. Retirement

    Roth Vs. Traditional IRA: Which Is Right For You?

    To answer this question, you need to consider several of the factors we outline here.
  3. Retirement

    Is my non-qualified Roth IRA distribution subject to taxes or early distribution penalties?

    The ordering rules must be applied to determine whether the distribution is subject to income taxes and/or the early distribution penalty. Under these ordering rules, distributions are taken ...
  4. Retirement

    How can I avoid paying taxes on my Social Security income?

    Learn how to calculate the percentage of Social Security income benefits that may be taxable, and discover strategies to reduce total taxes paid.
  5. Retirement

    What is the difference between a fixed and variable annuity?

    Understand the difference between fixed, variable and indexed annuities, and read a brief summary of their respective risks and advantages.
  6. Professionals

    Just Retired? No Better Time for a Second Career

    After working for decades and reaching retirement age, what's next? A second career, of course. Here's why and how.
  7. Retirement

    How does the Canada Pension Plan (CPP) work, and what asset mix does it hold?

    Learn the difference between a chartered financial analyst and the Canadian pension plan. Explore Canadian retirement options and how the CPP is invested.
  8. Professionals

    When Your Client's Retirement is Around the Corner

    With thousands of Baby Boomers reaching retirement age every day, here's a guide as to how financial advisors should approach and advise them.
  9. Professionals

    A New Wake-up Call for Savers

    Recent findings from an index that measures how many people who are at risk of not being able to maintain their current standard of living in retirement.
  10. Professionals

    Retirement Bliss? Not So fast: When Savings Lag

    Most people aren't saving enough for retirement. Here are some tips savers and financial advisors can use to change that.

You May Also Like

Hot Definitions
  1. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  2. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  3. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  4. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  5. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  6. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
Trading Center