Roth Conversions
If I currently have a Roth IRA and Ive had it for over 5 yrs and I want to start doing a conversion from my Traditional to a Roth in $50,000 segments, will every time I do a conversion have a new 5yr dont touch provision?
If I currently have a Roth IRA and Ive had it for over 5 yrs and I want to start doing a conversion from my Traditional to a Roth in $50,000 segments, will every time I do a conversion have a new 5yr dont touch provision?
Permalink Submitted by Alan Spross on Mon, 2012-02-27 16:30
Yes, until you reach 59.5.
However, your regular contributions will come out first until you reach 59.5 and they are tax and penalty free. The conversions are next and they are tax free but subject to the 10% penalty. That said, there are other penalty exceptions that could erase the 10% penalty, such as high medical costs, higher education, disability, health insurance if you are unemployed 12 weeks plus, etc. You would probably not be taking out these conversions anyway unless you had one of these situations under which you could claim the penalty waiver on Form 5329.
Finally, any part of your conversion that was not taxable when you converted will not have the 10% penalty if you withdraw that year’s conversion.
Permalink Submitted by Zachariah Hammel on Mon, 2012-02-27 22:09
Ok so a 64 yr old who has a Roth IRA for over 5yrs and has a couple traditional IRA’s and wants to start converting will not have to wait 5yrs before he can touch the money since he already has a Roth IRA older than 5yrs and is over 59.5 yrs of age
Permalink Submitted by Alan Spross on Mon, 2012-02-27 22:33
Correct.
In this case, the Roth is fully qualified. That means tax and penalty free distributions can be taken at anytime with no waiting periods. Ordering rules and Form 8606 reporting also no longer apply.