Roth Conversion
I have a question if someone could provide some clarity?
This is the actual scenario, My wife opens a Roth IRA 6 years ago with $100.00.
She also has a rollover account zero balance as well as a traditional 401k with $40,000.00
She quits her job, does a direct rollover of the traditional 401k $40,000.00 cash to the Rollover account (non-taxable event).
Then in the 6 year old $100.00 Roth account, she does a $40,000.00 Roth conversion at age 59 and pays taxes on the $40,000 as taxable income.
Then she moves the 6 year old $40,100.00 converted Roth to a new Roth with a different custodian.
Now she is past 59 1/2 and takes a $12,000.00 Distribution.
So is the $12,000.00 taxable?
Sorry if it seems complicated,
Thank You,
Jim
Permalink Submitted by David Mertz on Sun, 2022-02-13 14:09
By making the $100 contribution 6 years ago she has met the 5-year rule for Roth IRA qualification, so when she reaches age 59½ her Roth IRAs are qualified and any distributions from any of her Roth IRAs are tax and penalty free. Because she is over age 59½, the different 5-year rule for conversions no longer applies. Various movements of her Roth IRAs are irrelevant.