I have read the IRS publications and some other comments, but not quite clear. If i convert an ira to an existing roth ira that I have had for 7 years, am I subject to the 10% penalty if I withdraw proceeds above my original contributions within 5 years of the conversion? I have read a few comments that say if you have one Roth for over 5 years, you have met that 5-year rule already and this is a loop hole and you will not ever have to meet it again for future conversions. Is that correct or wrong?
@fireman0175 to make it simple, if you meet these two conditions, NOTHING that is distributed from the Roth IRA will ever be subject to any tax:
1) you are over 59.5 years old AND
2) your oldest Roth account has been open for at least 5 calendar years.
doesn't matter if they money is contribution dollars, conversion dollars or earnings. It's all tax free.
Since you are over age 59½, there is no early-distribution penalty on any distribution from your Roth IRA. If it has been more than 5 years since the year for which you made your first Roth IRA contribution, any distribution from your Roth IRAs is a qualified distribution, entirely nontaxable even if the distribution includes earnings.
Does that apply to conversions into an existing Roth too? Referring to earnings on those monies converted...
All of your Roth IRAs are treated as if they were one. Distributions from your Roth IRAs are all treated the same.
@fireman0175 to make it simple, if you meet these two conditions, NOTHING that is distributed from the Roth IRA will ever be subject to any tax:
1) you are over 59.5 years old AND
2) your oldest Roth account has been open for at least 5 calendar years.
doesn't matter if they money is contribution dollars, conversion dollars or earnings. It's all tax free.