IRA to Roth IRA Conversion
Is there a 5 year waiting period on a Roth account if my client, age 64, converted in 2010 $50,000 from his traditional IRA?
Is there a 5 year waiting period on a Roth account if my client, age 64, converted in 2010 $50,000 from his traditional IRA?
Permalink Submitted by Alan Spross on Wed, 2011-06-29 22:20
Perhaps and No. There are two different 5 year holding requirements:
1) For earnings to be qualified (tax free), the 5 year holding period starts with the year of his first Roth. If his first Roth contribution was prior to 2007, the 5 year period has already been completed
2) For the 10% penalty if client removes the conversion money within 5 years, No. This penalty stopped at age 59.5
But if client takes out any of the funds that are attributed to the 2010 conversion prior to 1/1/12, the taxable income client split between 2011 and 2012 will be accelerated to an earlier year. For example, if he converted 50k, but takes out 20k of that money this year, the taxable income will be 45k in 2011 and 5 k in 2012 instead of 25k in each year. This is not an additional tax or penalty, only a limit on the 2 year deferral time if he takes out conversion money prior to next January.