Post 59.5 years old Converting TIRA to ROTH
60 year old has a Traditional IRA and is considering converting to a ROTH IRA over several years.
This would be his first ROTH IRA.
Discussing this with his IRA representative, he was told gains would need to be 5 years old per conversion or be subject to the 10% penalty.
2 years later if he were to take a full distribution from the ROTH IRA, would any of the distribution be subject to the 10% penalty?
Does he need to wait the 5 years to avoid the 10% penalty on gains in the IRA as the IRA rep stated?
Permalink Submitted by Alan Spross on Sun, 2008-08-17 03:19
That information about a waiting period and penalty is incorrect.
Any distribution made after age 59.5 is exempt from the early withdrawal penalty. Since the subject is already 60 he has no further early withdrawal penalties to deal with.
However, he still must satisfy the 5 year holding requirement for his withdrawals to be “qualified”, meaning that his earnings would come out tax free. Since earnings come out LAST, it is unlikely to become an issue, but if he withdrew more than the amount of his conversions prior to the 5 year holding period, the earnings portion would be taxable.
If he wanted to, he could convert to a Roth and withdraw those conversion dollars the very next day totally tax free.
Permalink Submitted by Clyde Wolf on Sun, 2008-08-17 19:28
Alan-oniras,
Thank you for your prompt reply.