Withdrawals from converted Roth
Just so that I fully understand the rule for withdrawal of converted funds I ask the following. A person is over 59.5 years of age and converts her SEP IRA to a new Roth IRA. She has never had a Roth IRA in the past. If she wishes to withdraw from this new Roth account, how will she be taxed? Is there a five year rule on the earnings or not?
Permalink Submitted by Alan - IRA critic on Wed, 2013-07-17 19:40
Taxpayer can take tax and penalty free distributions up to the amount of the conversion at anytime. But the 5 year holding period must be completed before the taxpayer can withdraw any earnings on the converted amount without owing taxes on the earnings. Prior to completion of the 5 year holding period, withdrawals are deemed to come first from the conversion and any earnings would come out last. The 5 year holding period begins 1/1 of the year the Roth is first funded, in this case with conversion money.
Permalink Submitted by Joseph Cosden on Wed, 2013-07-17 19:58
Thanks for your input. That is exactly what I was afraid of.