Roth IRA conversion rules
I had a gentleman tell me tonight at one of my seminars that Fidelity said if he converted $100,000 from his Traditional IRA to a ROTH IRA this year that he could not touch any of this money or the gains for 5 years. This was the first time I had heard this and was truly baffled since this occurred at a seminar I was presenting. I have heard Ed speak several times over the past 2 years and had never heard this rule. This gentleman was 62 yrs old and had no prior Roth IRA’s. I understand the FIFO rule and maybe I just assumed conversions worked the same way as contributions. Please help because I looked like a deer in headlights.
Permalink Submitted by Edward Czapor on Fri, 2010-09-03 14:45
Since this person is over age 591/2, the five year rule for penalty on conversions no longer applies. He therefore could withdraw the converted amount ($100k) tax and penalty free at any time. If he had previously established a ROTH either by contribution or conversion that has existed for at least 5 years, then earnings would also be tax and penalty free since all withdrawals would be qualified.