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When I came up with the Unconventional Roth IRA Strategy to Lower Tax Bill I realized that to be successful I needed to track my Roth IRA money more closely. Once I dug a little deeper, I found that even if you are using the Roth IRA in a more traditional way, you still need to track your Roth IRA.
Early Retirement. The typical age for a tax free withdrawal is after age 59.5. However, what if you retire earlier than that? I previously described How to Make Early Roth IRA Withdrawals which details exactly how that works.
Tax Treatment of Contributions and Conversions. In order to make the tax free withdrawals, one of the key components is knowing how much you’ve contributed, how much you’ve converted, and in which years. After 10 years of contributions… can you remember how much you put in each year?
It’s Not Captured on Your Tax Return. You might think that the information is on your tax return. After spending hours digging through the last ten years of tax returns, I found that the conversions are, but the contributions probably are not (unless you used it to claim the retirement savings credit).
Do your future self a favor and start tracking it. It’s really easy, I made a quick excel spreadsheet to get the job done:
(The negative value for the 2008 conversion is because I had to recharacterize a prior conversion.)
You can download a copy of the spreadsheet and change the numbers to your own. Each year you complete your taxes, print off an updated copy and throw it in your tax folder.