Rollover of after tax contributions
Client received an offer regarding her frozen pension plan. One option allowed for a rollover of a lump sum, which included both pre-tax and post-tax dollars. The online paperwork was confusing and client opted to rollover the pre-tax dollars directly to her IRA. For the post-tax dollars she opted to receive a check. Can client rollover the post- tax dollars to a Roth IRA, if the rollover is completed within 60 days?
Permalink Submitted by Alan - IRA critic on Tue, 2019-11-26 14:52
Yes, client can do that. This does not count against the one rollover limitation either since the distribution came from a qualified plan. Client should get a 1099R for each distribution, the direct rollover and also for the after tax distribution. The rollover to a Roth IRA will be tax free.
Permalink Submitted by Steve Moerdyk on Tue, 2019-11-26 22:18
I am 66 years old.. If I convert a $100,000 IRA to a Roth (and I pay the taxes on this conversion from my personal checkbook).. Can I immediately start to take a distributions from this new Roth (that 5 year ‘wait’ rule is confusing)!?
Permalink Submitted by Alan - IRA critic on Tue, 2019-11-26 23:07
Have you made any Roth contributions in the past? If so, what was the first year you contributed? Otherwise, if this conversion is your first Roth contribution of any kind, you can withdraw up to the amount converted any time without tax or penalty, but any earnings on your conversion are not tax free until your Roth becomes qualified. In your case your Roth becomes qualified after 5 years from your first contribution of any type.