Roth Conversion
I’m working with an individual who is considering converting his IRA to a Roth. My understanding is that if he converts to a Roth he cannot take out the earnings for 5 years and he must be past the age of 59 1/2. I also understand that he can take out what he put in during that 5 years without any tax liability. Is this correct?
Permalink Submitted by Alan Spross on Mon, 2009-11-16 20:42
That’s right. Earnings taken out prior to meeting the 5 year holding period and reaching 59.5 are subject to tax and penalty. In addition, if under 59.5, each conversion must be held for 5 years to avoid the 10% early withdrawal penalty for removing the converted dollars. However, there would be no income tax on the converted amounts, just the penalty.