Converting IRA to Roth — co-mingling with old Roth
80-year-old single male. Open initial Roth account many years ago. Converted part of standard IRA to Roth IRA more than 10 years ago. Thinking about converting balance of standard IRA to Roth IRA.
Questions:
Is it best to open a second Roth IRA account or to simply add to the existing Roth account?
I understand each conversion starts the clock on a new five-year rule for withdrawals. Am I correct?
Can withdrawals (before the five years are up) be made from the older Roth IRA without any penalty?
Permalink Submitted by Alan - IRA critic on Tue, 2019-12-24 15:43
There is no tax reason to open a new Roth account, but if he lives in a state that does not provide good creditor protection for Roth IRAs like CA, and the conversion amount is over 200k, please advise. Since his Roth IRA is fully qualified, he does not have any 5 year holding periods any longer. His entire Roth balance including amounts just converted can be withdrawn any time without tax or penalty.
Permalink Submitted by Norman Cook on Tue, 2019-12-24 18:01
The Rule Applies to Each Conversion: The 5 year rule applies separately to each and every conversion. Keep in mind that this is different than the 5-year rule as applied to contributions. You have to meet the 5 year rule separately for each and every conversion to avoid the 10% penalty (unless an exception applies as noted below).
Permalink Submitted by David Mertz on Tue, 2019-12-24 18:08
The 5-year rule for Roth conversions only applies to someone who is under age 59½ since it only serves to eliminate any early distribution penalty that would otherwise apply to a distribution of the converted amount.