Roth IRA Questions
by David
by David (for Alan)
Thanks very much for your replies several days ago. I have prepared the following summary and would like you to review and opine upon it. Thanks in advance.
1) Roth conversion of $1,000,000 at the following ages with the following withdrawal amounts. Are my conclusions as to taxability and non-deductible 10% penalty amounts correct? If not, please comment / correct.
Note: I have used unrealistic withdrawal amounts based upon unrealistic growth only to flush out application of the taxability and 10% penalty rules.
$1,000,000 conversion @ age 50
Age 50 – W/D Amount: $150,000 – – Taxable: -0- 10% Penalty Incurred On: 150,000
Age 51 – W/D Amount: 150,000 – – Taxable: -0- 10% Penalty Incurred On: 150,000
Age 52 – W/D Amount: 150,000 – – Taxable: -0- 10% Penalty Incurred On: 150,000
Age 53 – W/D Amount: 150,000 – – Taxable: -0- 10% Penalty Incurred On: 150,000
Age 54 – W/D Amount: 150,000 – – Taxable: -0- 10% Penalty Incurred On: 150,000
Age 55 – W/D Amount: 150,000 – – Taxable: -0- 10% Penalty Incurred On: -0-
Age 56 – W/D Amount: 150,000 – – Taxable: 50,000 10% Penalty Incurred On: -0-
Age 57 – W/D Amount: 150,000 – – Taxable: 150,000 10% Penalty Incurred On: -0-
Age 58 – W/D Amount: 150,000 – – Taxable: 150,000 10% Penalty Incurred On: -0-
Age pre 59 ½ – W/D Amount: 150,000 – – Taxable: 150,000 10% Penalty Incurred On: -0-
Age post 59 ½ – W/D Amount: 150,000 – – Taxable: -0- 10% Penalty Incurred On: -0-
Age 60 and thereafter – W/D Amount: 150,000 – – Taxable:-0- 10% Penalty Incurred On: -0-
$1,000,000 conversion @ age 56
Age 56 – W/D Amount: $300,000 – – Taxable: -0- 10% Penalty Incurred On: 300,000
Age 57 – W/D Amount: 300,000 – – Taxable: -0- 10% Penalty Incurred On: 300,000
Age 58 – W/D Amount: 300,000 – – Taxable: -0- 10% Penalty Incurred On: 300,000
Age pre 59 ½ – W/D Amount: 300,000 – – Taxable: 200,000 10% Penalty Incurred On: 300,000
Age post 59 ½ – W/D Amount: 300,000 – – Taxable: 300,000 10% Penalty Incurred On: -0-
Age 60 – W/D Amount: 300,000 – – Taxable: 300,000 10% Penalty Incurred On: -0-
Age 61 – W/D Amount: 300,000 – – Taxable: -0- 10% Penalty Incurred On: -0-
$1,000,000 conversion @ age 58
Age 58 – W/D Amount: $500,000 – – Taxable: -0- 10% Penalty Incurred On: 500,000
Age pre 59 ½ – W/D Amount: 500,000 – – Taxable: -0- 10% Penalty Incurred On: 500,000
Age post 59 ½ – W/D Amount: 500,000 – – Taxable: 500,000 10% Penalty Incurred On: -0-
Age 60 – W/D Amount: 500,000 – – Taxable: 500,000 10% Penalty Incurred On: -0-
Age 61 – W/D Amount: 500,000 – – Taxable: 500,000 10% Penalty Incurred On: -0-
Age 62 – W/D Amount: 500,000 – – Taxable: 500,000 10% Penalty Incurred On: -0-
Age 63 – W/D Amount: 500,000 – – Taxable: -0- 10% Penalty Incurred On:-0-
$1,000,000 conversion @ age 60
Age 60 – W/D Amount: 300,000 – – Taxable: -0- 10% Penalty Incurred On: -0-
Age 61 – W/D Amount: 300,000 – – Taxable: -0- 10% Penalty Incurred On: -0-
Age 62 – W/D Amount: 300,000 – – Taxable: -0- 10% Penalty Incurred On: -0-
Age 63 – W/D Amount: 300,000 – – Taxable:100,000 10% Penalty Incurred On: -0-
Age 64 – W/D Amount: 300,000 – – Taxable: 300,000 10% Penalty Incurred On: -0-
Age 65 – W/D Amount: 300,000 – – Taxable: -0- 10% Penalty Incurred On: -0-
Permalink Submitted by Alan Spross on Fri, 2009-09-25 19:34
The conclusion is incorrect in the following items:
1) Age 50 conversion – At age 56 until 59.5, there is a 10% penalty on the taxable amount because you are now taking out earnings prior to age 59.5. Since the full million has already been distributed, these amounts must be earnings. You correctly show them as taxable, but they are also subject to the early withdrawal penalty. This early withdrawal penalty is different from the conversion 5 year holding requirement. All other conclusions are correct.
2) Age 56 conversion – all correct
3) Age 58 conversion – all correct
4) Age 60 conversion – At age 63, the taxable amount is 200,000 as you are now 200,000 into earnings not yet qualified; all others correct.
All conclusions assume no other Roth account exists or ever existed beside the one in the example.