Withdrawal from Conversion Roth under age 59 1/2
Client converted to a Roth 5+ years ago, converted amount $40k, value now $140k,
1) Can they withdraw the $40k tax-free on a FIFO basis?
2) Can they avoid the 10% penalty on earnings?
Client converted to a Roth 5+ years ago, converted amount $40k, value now $140k,
1) Can they withdraw the $40k tax-free on a FIFO basis?
2) Can they avoid the 10% penalty on earnings?
Permalink Submitted by Alan - IRA critic on Fri, 2014-09-12 23:12
1) Yes, distributions of conversions are always tax free, and there is no penalty if the conversion has been held at least 5 years. The conversion comes out before any earnings.2) If client has reached 59.5, the entire account is tax and penalty free as it is qualified. If not 59.5, the earnings will be both taxable and subject to penalty (unless client qualifies for one of the many penalty exceptions).