I have been searching endlessly for an answer here and have discussed with accountants as well who cannot tell me definitively what will happen! I tried calling the IRS, which, as I expected, did not help. Here is my situation:
I had originally opened up a Roth IRA account directly out of college and have been regularly adding money under the assumption that I could always remove my contributions after the 5 year rule (I also have a 401K through my employer, which is for retirement… but the Roth IRA was meant to be for additional, tax-free retirement funds with the understanding that I would probably pull out my contributions from time to time for various investment opportunities). Here are my details (I have made up rounded numbers for simplicity):
I opened up a Roth IRA Vanguard account in 2011. I had made contributions of $10K to Vanguard from 2011 to 2014. I then rolled this account over to a Betterment Roth IRA account in 2015 and have made $15K in contributions to Betterment Roth IRA from 2015 through today. I know that I cannot withdraw my Roth IRA contributions without penalty unless the account has been open for 5 years. What I’m not clear on is:
* Can I withdraw the $10K in contributions that I made to my Vanguard account, or will this incur a penalty because the rollover event from Vanguard to Betterment (after only 4 years of being open) consequently "restarts my 5 year clock" or if the 5 year clock on the entire account starts when I created the account in Vanguard that I rolled over (with the 5 years clock continuing even after the rollover). * If the 5 year clock starts when I created the Vanguard account -- meaning the account would be a total of 8 years old in adding Vanguard account time + Betterment account time -- then I should also have penalty free access to the $15K that I've put into the Betterment account over the last 4 years in addition to the $10K in Vanguard.
Anyone have suggestions on how I can definitively figure this out? The financial ramifications of whether or not these withdrawals are penalty free are very large.