Roth conversions
I am 76 years old. My wife (also 76) is beneficiary of my Roth. While I was working, I contributed to my Roth from 1998 until 2002. I have been converting into my Roth every year starting in 2005 up to and including 2014.
My questions are–
Does each conversion start a new 5 year holding period?
Do I have to wait until 2019 to withdraw my conversions without a penalty?
I am hoping doing multiple conversions has not created an accounting nightmare when I (or my wife) start to withdraw the funds.
Thank you
Permalink Submitted by Alan - IRA critic on Tue, 2015-08-04 20:15
Your holding periods were all met in 2003, and therefore your Roth is entirely tax and penalty free, and has been since 2003. All you have to do is report any distributions on Form 1040, line 15a. Upon your death, if your wife is still living, she should immediately roll the Roth into her own name as the new owner, and any distributions to her will continue to be reported in the same manner. There are no accounting problems or complexities any longer for this Roth account. There are also no RMDs for either you or your spouse.
Permalink Submitted by tomd37 on Tue, 2015-08-04 21:06
And remind your wife now and in the future as may be needed, if you pass first she should be sure to name a primary beneficiary and contingent beneficiary when she assumes ownership. That action can be easily overlooked and can be very important. After she passes and the beneficiary inherits the Roth IRA, required minimum distributions start the year after her death for the non-spousal beneficiary. Those distributions also are not taxable (at least under current law). Tom D.
Permalink Submitted by Alan - IRA critic on Tue, 2015-08-04 21:46
To add to Tom’s comments about the importance of the surviving spouse listing their own beneficiary ASAP – if this is not done and the estate of the surviving spouse becomes the default beneficiary, the 5 year rule will apply regardless of the age of the surviving spouse at death. As opposed to a TIRA account, a Roth IRA decedent is always treated as passing PRIOR to the RBD (because there is NO RBD for a Roth). The result is that the 5 year rule will apply to the estate and therefore to any estate beneficiaries.