Roth Conversion at age 71
Hello. Have a client who wants to convert some of her Trad. IRA assets to her Roth IRA. What are the rules on distribution of funds from Roth, taxes, penalties, etc.. Thanks.
Hello. Have a client who wants to convert some of her Trad. IRA assets to her Roth IRA. What are the rules on distribution of funds from Roth, taxes, penalties, etc.. Thanks.
Permalink Submitted by Alan - IRA critic on Fri, 2014-08-22 22:14
First, she must complete her RMD for the year prior to doing any conversions. Then she can convert additional amounts over and above the RMD. Once in the Roth distributions are qualified once she has met the 5 year holding period and all distributions are tax free. Before the 5 year period from her first Roth contribution is completed, she can distribute amounts up to the the contributions total tax and penalty free. Earnings do not become tax free until after the 5 years is complete, until then earnings come out last.