Taxable vs Nontaxable Roth Balance

[AMES]

On the new version of the quarterly account statements next to the "Your Balances" section, there is a box that says, "Your Nontaxable Roth Balance" and shows that my nontaxable Roth balance is only 48% of my total Roth balance. Can someone explain to me why any of my Roth balance is taxable and how to check that the reported amount is accurate? The point of Roth is that it's funded from money that was already taxed. How is some, in my case most of it, taxable? I had never noticed this before because the old version of quarterly statements didn't include this information.

(I'm a brand-new forum user and this is my first post. I apologize if this information has been discussed somewhere already. I used the search function and couldn't easily find anything related.)

Thanks.

 

[evilanne]

How long have you been contributing to the Roth? I'm not sure what TSP is. doing but there is a 5 year rule that applies to Roth accounts and if you are under 59.5, there is a penalty for early withdrawal that could be considered taxable. If I were guessing, the 48% would likely be your account contributions.
Happy Trails

 

[Globalpack]

I noticed that too on my account and wondered the same thing. Both contributions AND earnings are not taxable so WTF?

 

[Skorcher]

You can withdraw your Roth IRA contributions at any time, for any reason, with no tax or penalties. That's because you make contributions with after-tax dollars, so you've already paid income taxes on that money. Withdrawals on the earnings in the account work differently. These distributions may be subject to income taxes and a 10% penalty, depending on your age (<59.5 years) and how long you've had the account (i.e. at least 5 years).

From the TSP Roth you cannot just withdraw contributions. The TSP will make you withdraw a proportionate amount of contributions & earnings. So if your Roth TSP account is less than 5 years old your withdrawal of earnings will be taxable income. If you're younger than 59.5 you will also have to pay a 10% penalty. The TSP is showing your accumulated earnings as taxable because these conditions apply to you.

 

[AMES]

Oh OK that makes sense. It would be nice for the statement to include that explanation. So just to clarify, if I leave the Roth balance in TSP until I can withdraw it normally after retirement, then none of the Roth withdrawals would be taxable, correct?

 

[Skorcher]

Oh OK that makes sense. It would be nice for the statement to include that explanation. So just to clarify, if I leave the Roth balance in TSP until I can withdraw it normally after retirement, then none of the Roth withdrawals would be taxable, correct?

Correct as long as the account is at least five years old at that time.

 

[evilanne]

Oh OK that makes sense. It would be nice for the statement to include that explanation. So just to clarify, if I leave the Roth balance in TSP until I can withdraw it normally after retirement, then none of the Roth withdrawals would be taxable, correct?

Correct as long as the account is at least five years old at that time.

and you retire after reaching 59.5.
Note: If you take it out over a period of time, it shouldn't be an issue as they. distribute contributions first, see https://www.your-roth-ira.com/roth-ira-ordering-rules.html