Post 70.5 conversion to Roth
I am not seeing any detail in the 590 on this question:
If someone does a conversion from a Traditional IRA to a Roth after 70.5 (I know they can not convert their RMD for the year and need to take it however) will there be a 10% if they need access to any of the funds prior to 5 years (from Roth opening and conversion)?
I am thankful for any help with this specific question.
Many thanks!
Permalink Submitted by Denise Appleby on Mon, 2008-07-14 16:16
No. Because the person will be at least age 59 1/2 and therefore not subject to the 10% early distribution penalty.
Permalink Submitted by M V on Mon, 2008-07-14 16:51
Many thanks for that piece of the puzzle…I do seem to recall in the back of my mind that there is a 5 year clock for $s converted starting the date when converted – so there can be several clocks going at once.
Is there still a 5 year conversion clock post 70.5?
Permalink Submitted by Edward Czapor on Mon, 2008-07-14 17:29
As Denise stated, there is no penalty on converted amounts after age 591/2 and therefore no five year clock for a 10% penalty. However the other five year rule applies for tax free withdrawal of earnings regardless of age. If the converted amount is the first Roth established, then earnings would be taxable if any were withdrawn prior to the fifth year. This clock starts with the year a Roth is first established either by contribution or conversion.
Permalink Submitted by M V on Mon, 2008-07-14 17:38
I think that covers everything – I apologize for not being clearer, but it is hard not knowing what you don’t know.
Many thanks all for the help! Have a great week.