Attn. alan oniras: Re 5 Year Wait -#2
Now, understanding the three tier structure of the Roth IRAs’ balances, I also follow your non-spousal beneficiary explanation. Presumably, the RMD’s would now be readjusted for the (presumably) younger beneficiary’s age.
I am less clear on the spousal beneficiary. If the previous two years “count” and we are aiming for a total of 5 years for the holding period, then the spouse has 3 more years to wait. I don’t understand what shorter or longer holding periods you are referring to.
DBRJ
Permalink Submitted by Alan Spross on Sat, 2010-02-06 00:29
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Re: Spousal inherited Roth assumed by surviving spouse: The holding period is the longer of either the surviving spouse’s own Roth IRA holding period or the holding period of the deceased spouse at the time of death. The time after death is added to the higher of the other two holding periods to determine the current holding period.
Example: Survivor has had a Roth 2 years and inherits spouse’s Roth of 4 years. Therefore, the longer 4 year period is used and one more year is needed after first spouse’s death for the survivor to have attained the 5 year holding period.
Permalink Submitted by david johnston on Sat, 2010-02-06 05:51
I think I understand. Thanks.
Regarding my other posting, I apparently still had not fully understood the “three tiers” of a Roth IRA’s balance. In discussion with your fellow expert eczaporea, It appears that the 10% penalty for less-than-5-yr “conversion” withdrawals applies only if less than 59.5 yrs old; if over that age, they are treated the same as ‘contributions” – tax and penalty free.
Thanks for your help.
DBRJ
Permalink Submitted by Alan Spross on Sat, 2010-02-06 18:26
Yes, that is correct.