Roth IRA Question
I have an old Ordinary Life Insurance Policy which has reached the point where dividends distributed to me are taxible. They are reported on Form 1099-R and coded as a normal distribution (box 7). When entering this to my tax return via TurboTax the software asks whether any of the distribution was rolled over to a TIRA or converted to a Roth IRA. I am 73 and have no earned income. Is there an opportunity here to place this amount into my Roth IRA? If so, does it need to be done via trustee to trustee transfer? Thanks!
Permalink Submitted by Al Fry on Sun, 2009-01-11 23:36
No, Code 7 simply means it is not subject to the 10% penalty. You would have to have earned income to contribute to a Roth. If you did not need the distribution, you may be able to ask the company to use the dividend to purchase “paid-up additions” which would be addional insurance income-tax free to your beneficiary.