Penalty Free 401k withdrawal strategy?
This has probably been covered a million times and my searches have turned up too many hits… Will this work???
1. Roll over 401k into a conventional IRA right now
2. Roll over Conv IRA into Roth IRA in 2010 once income limits dissappear.
3. Pay Taxes in 2011 and 2012.
4. Withdraw entire or desired portion of rolled over amount from Roth.
Thanks.
Permalink Submitted by Anonymous (not verified) on Wed, 2009-02-18 23:24
1) If you are eligible for distributions, usually marked by separation from service.
2) No restrictions
3) No restrictions
4) You can withdraw from the Roth, but conversions must be held for 5 years or a 10% early withdrawal penalty applies unless you are over 59.5. In addition, if you withdraw conversion funds that you deferred taxes on, you will lose the 2 year deferral. In other words, you cannot run your TIRA funds through a Roth conversion, then take distributions while continuing to defer the conversion taxes for 2 years.
Permalink Submitted by Anonymous (not verified) on Thu, 2009-02-19 01:30
Thanks, the 5yr holding period and taking away the 2yr deferral was what I was missing. Seemed too good to be true.
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