Early W/D from a Roth Conversion
I’m confused about the ‘ordering’ of Roth IRA accounts – and especially so in view of a need to make an ‘early’ w/d. Here is the scenario: Over the age of 59.5, have a Contributory Roth IRA begun in 1999. Also made a much larger Roth Conversion in 2010, in a ‘new’ Roth account … on which I’m still paying tax.
If I wanted to make a partial withdrawal from the Conversion Roth account, am I now required to w/d from the Contributory Roth account first?
As the 5 year period has not yet elapsed on the Roth Conversion account, am I subject to the 10% penalty on whatever I withdraw from that account?
Are there any steps that can be taken to avoid the 10% penalty?
Regards,
Dan Mc
Permalink Submitted by mk foss on Mon, 2012-09-03 22:25
If you make an early withdrawal from your Roth you will likely not have a problem.
You can withdraw the entire conversion amount without penalty and without tax.
If you withdraw more than the conversion amount, the excess will be taxable but no penalties apply.
The contributory IRA is not affected by Roth withdrawals; there is no requirement that you tap that account first.
Permalink Submitted by Alan Spross on Mon, 2012-09-03 22:36
Mary Kay,
I think you missed that the contributary account was also a Roth, therefore his Roth is fully qualified (5 years and over 59.5).
As such, distributions of any amount from either account are tax and penalty free. Conversion 5 year holding periods all ended at 59.5.