Roth Conversion
my client is 65 and retired. he has SS, an IRA and an individual brokerage account. He never set up a Roth IRA. Can he set up a Roth IRA now and do Roth conversions with his rollover IRA? How does the 5 yr rule affect him, if at all? Thanks
Permalink Submitted by Alan - IRA critic on Tue, 2020-03-24 17:30
He can convert as much as he is willing to pay taxes on. If 85% of his SS income is not included in his AGI, conversions will increase the amount of SS taxed, making his marginal rate higher than his nominal tax rate. There are two different Roth IRA holding periods. The 5 year period for conversions no longer applies to client since he is over 59.5. The 5 year holding period for earnings to be tax free still applies and a conversion in 2020 will start the 5 year holding period for earnings to be tax free will start 1/1/2020. Up to 12/31/2024, he could withdraw any amount up to the earnings tax and penalty free.