Real Tacos Can Not Contain Eggplant - A Guide to Roth Distributions

Episode Notes

Amy Walls of Thimbleberry Financial likes to talk about "rainy" and "sunny" times when it comes to personal finance.  Taking distributions from a Roth account can be one of the sunny times, if you follow the rules.

First we recap the ways we can contribute to a Roth IRA. They are:

Now we can look at the ways in which money is distributed out of a Roth account, keeping in mind the acronym  "Real Tacos Can Not Contain Eggplant."

Assets are distributed in the following order:

1. Regular Roth IRA participant contributions, includes rollovers of directly contributed Roth 401(k) and 403b dollars.

2.Taxable Conversion and rollover amounts- Pre-tax IRA contributions or an old employer plan that is converted.

3.Non-taxable Conversion and rollover amounts - After-tax IRA contributions and internal 401k conversions (Mega backdoor Roth)

4.Earning on Roth assets- Growth.

For illustrative purposes, Amy gives an example of these. Here it is, laid out.

Sara opened a Roth IRA in March 2019 and makes contributions for 2018 and 2019. The 2018 contribution treats the account as if it were opened on January 1, 2018. In 2019 she converted a $35,000 Traditional IRA to a Roth IRA. Sara is 57 years old at the end of 2020. The account contains:

Let’s say Sara wants to take a $52,000 distribution.

The rules around Roth accounts are not always easy to understand.  Hiring a professional like Amy can go a long way.  You can find her online at

or give her a call at 503-610-6510.