Roth Conversion: New Roth vs. Existing Roth
Regarding the conversion from TIRA to RIRA, and how the Roth 5-year waiting period relates to a client over 59.5:
1. If we move the conversion into a newly established Roth, when can the client take withdrawals penalty free?
2. If we move the conversion into a Roth IRA established in 2005, when can the client take withdrawals penalty free?
3. For withdrawal purposes, which Roth would more beneficial to the client?
Permalink Submitted by Alan Spross on Fri, 2008-11-14 05:26
1) The very next day. There is no early withdrawal penalty after age 59.5.
2) Same as above. If the taxpayer has reached 59.5, there is no penalty. It does not matter WHEN the account was opened or when the conversion was done.
3) The only difference relates to technicalities in recharacterization procedures if client wants to reverse the conversion or becomes ineligible due to income. There is no difference with respect to current taxes or penalties. If there is a possible need to recharacterize, the separate Roth is better. Once the recharacterization deadline passes, the Roths can be combined.
Permalink Submitted by Monte Snider on Fri, 2008-11-14 16:17
Thanks