Roth IRA Tax question - withdrawing basis

Bob Ama has a Roth IRA with company ABC. His basis in that account is $4,000. The balance is $5,000.
Bob has another Roth IRA with company XYZ. His basis in that account is $1,000. The balance is $1,234.

According to the rules of the Roth as Bob understands them, he is allowed to withdraw the basis without penalty.
Is the basis only looked at in total? …not by investment company?
In other words, would Bob be able to take all $5,000 out of the ABC account, leaving him with the $1,234 in his XYZ account, a basis of zero, and no penalty on that withdrawal?

I’m pretty sure it’s by IRA account. He has two IRAs. He can withdraw the basis from each of them without penalty. He doesn’t have an IRA that is spread across two companies.

When you look at the US code, a Roth IRA refers to a single account that was established for that purpose:

…the term “Roth IRA” means an individual retirement plan (as defined in section 7701(a)(37)) which is designated (in such manner as the Secretary may prescribe) at the time of establishment of the plan as a Roth IRA.

At times where the law is about aggregates across accounts, the code uses “all”:

The aggregate amount of contributions for any taxable year to all Roth IRAs maintained for the benefit of an individual shall not exceed the excess (if any) of—…

Okay. That’s very helpful. Thank you.

If you have a Roth 401K and a regular 401k, are RMDs computed and apply separately to both?

RMDs don’t apply to Roth accounts. The purpose of an RMD is so the government can get its taxes. You already paid those for the Roth.

I guess I was wrong. Roll your Roth 401(k) into a Roth IRA so you no longer have RMDs on that money.


Followup question…if Bob combined/rolled his XYZ Roth into his ABC Roth that would combine the bases into one, right? It seems so obvious, but I would like some reassurance.

Correct. Just make sure that if the administrators are different that the ABC administrator knows the basis of the XYZ plan. The ABC administrator is supposed to track it all for you, but if you tell them that basis isn’t available then they might shrug their shoulders and say “oh well, no basis”.