Roth IRA distribution before age 59.5
I keep reading different answers. I have a roth IRA that is over 10 years old. I converted a traditional IRA to the Roth when the law first allowed. I have not made any additional contributions. If I take a withdrawal – I am 57 yrs old – will I have to pay a penalty. I am taking the withdrawal to put into my business.
Permalink Submitted by Alan Spross on Wed, 2011-07-20 21:59
There is no penalty on distribution of your conversion money if the conversion was done prior to 2007. There was a 5 year holding period for the conversion to avoid penalty but you have long since satisfied that period. Up to the amount of your conversion, your distribution would be tax and penalty free. But you still need to report it on Form 8606 if you take it prior to 59.5.
At 59.5 your entire Roth is fully qualified and tax free including the earnings and at that point you no longer need an 8606 to report distributions either.
At this time if you take out MORE THAN the amount you converted, the additional amounts would be from earnings. These amounts would be taxable and subject to penalty if you take them out prior to 59.5.