RE: Roth IRA Conversion
A client aged 82 has multiple IRAs CDs in different banks. He also has an IRA in a stock account. He also has a $1,500 Roth in a stock account. He would like to convert part of his IRAs into a Roth. Can he convert some of his IRA accounts into a Roth and take his RMDs out of a different account before the end of the year. He can pay the tax out of other proceeds. What are the pros and cons of adding to the small Roth stock account or should he convert to a new Roth? At this age can he withdraw funds from the converted Roth without taxation before the 5 year period is up?
So far is the $100,000.00 AGI lifted for the following years for conversions?
Permalink Submitted by Alan Spross on Thu, 2010-08-19 21:39
The 100,000 modified AGI limit for conversions ended for good on 12/31/09.
If his first Roth contribution was in 2005 or before, his Roth is fully qualified. He can take out any amount he wishes free of tax or penalty. If the 5 year holding period has not yet been met, then he would have to pay tax on the earnings only, and they do not come out until the rest of the balance has been withdrawn. The only reason not to convert into the existing Roth is to make any recharacterization calculations easier, but since the current Roth is so small, this is not a big deal.
For this year or future years, he must take his total RMD out before converting. The RMDs can come from any combination of the current IRA accounts, but the total amount must be taken out prior to converting.