Traditional to Roth conversion question
Good afternoon everyone.
I am 64 years old, and I am considering performing traditional IRA to Roth conversions beginning in calendar year 2022, and I am planning to convert about 10 percent of my traditional IRA assets annually over the next 8 to 10 years. Because I am the beneficiary of a decedent IRA, and I am already taking RMDs as a non-spouse beneficiary (the IRA owner died in 2008), I’d like to avoid RMDs from my own traditional IRA(s) in future years if possible.
Since I am over the age of 59.5, would there be any early withdrawal penalty of any converted assets in the event I would need them earlier than 5 years? I guess I’m confused as to whether converted assets have to remain in the Roth for 5 years to avoid a penalty even though I am older than 59.5.
Thank you.
Permalink Submitted by Alan - IRA critic on Fri, 2022-01-14 21:47
There is no penalty for withdrawing conversions after 59.5. The only question is whether your entire Roth IRA is now qualified or not. If you made any allowed Roth contribution (regular or conversion) prior to 2018, then your Roth is qualified and tax free. If you didn’t you must wait until you have held your Roth 5 years before any gains can be distributed tax free.
You could be overshooting if you plan to convert your entire TIRA, since each conversion you do will reduce your future RMDs, and there often is a point where paying conversion taxes is counterproductive since you may have already reached a point where conversion taxes could be at a higher rate than you will save with reduced future RMDs.
Permalink Submitted by David Freeman on Sat, 2022-01-15 00:23
Thank you for your response. My Roth was established well before 2018. And I really appreciate your comment regarding overshooting my conversions, as this is something I really hadn’t considered.