Withdrawals of Principal from IRA Roth Conversion
Client had Roth IRA for over five years after retiring at age 55. Withdrew money after holding it for five years and started withdrawing when he was 60. Has since exhausted that account.
Fast forward to late 2022. Has very large balances in multiple Traditional IRAs. Started new Roth Conversion IRA of $75,000 in December 2022 and did another conversion to the same Roth Conversion IRA earlier this year.
Next year in 2024, if he wanted to, he could start withdrawing the principal of his conversions (the $75,000) each year without paying taxes on that withdrawal, correct? As long as he doesn’t take out any earnings of the account for five years, he would be okay?
Every time I think I have this figured out, I see something that I think refutes this. Appreciate any feedback.
Permalink Submitted by Alan - IRA critic on Wed, 2023-05-10 14:52
Since client first contributed to a Roth IRA over 5 years ago and is also over 59.5, his Roth IRAs are qualified. As such he could withdraw the full balance at anytime without tax or penalty, and will only have to report distributions on line 4a of Form 1040. His prior draining of his Roth IRA has no affect on his current situation as he was not required to have a continuous balance.