Does someone over 70 1/2 have to wait 5years on roth convers
Does someone over the age of 59 1/2 or 70 1/2 have to wait 5 years after converting to a roth to access any of the funds without penalty?
Does someone over the age of 59 1/2 or 70 1/2 have to wait 5 years after converting to a roth to access any of the funds without penalty?
Permalink Submitted by mk foss on Thu, 2008-10-16 17:47
The five year period refers to withdrawing earnings from the Roth IRA. Earnings are the last funds to come out of the Roth. First a person recovers the nondeductible contributions to the Roth. The Roth conversion proceeds come out next. Only after the owner gets their after tax money out are the earnings withdrawn.
Unless they shut down the entire Roth within the 5 year period, it isn’t likely that the earnings would be removed before it ends.
Permalink Submitted by WILLIAM Czerkies on Thu, 2008-10-16 19:03
I understand your response. However, in the case with an annuity with an inusurance company, doesn’t LIFO apply? If so, if a distritbution was taken from the annuity during the first 5 years, isn’t the interest taken out first, or are the rules different with the roth?
Permalink Submitted by Al Fry on Thu, 2008-10-16 20:21
An annuity in an IRA, whether a TIRA or a ROTH, takes on the IRA taxation, not NQ Annuity taxation.
Permalink Submitted by Alan Spross on Thu, 2008-10-16 21:43
bc,
In case your initial post reflected the 5 year holding period for conversions rather than the 5 year requirement for qualified earnings, the conversion holding period disppears at age 59.5. Therefore, a taxpayer could convert after 59.5, and pay no early withdrawal penalty on either distributions of conversion dollars OR on the distribution of earnings, even if the earnings were otherwise taxable.