To Roth or not to Roth?

Columbia_Student
Sat, 12 Dec 2009 17:20:53 +0000

And more info here
[Roth IRA 5 Year Rule](Roth IRA 5-Year Rule)



Understanding Each 5-Year Rule
There are two five-year rules that apply to Roth IRA conversions and contributions. Both of these rules affect the tax status of a distribution taken from the Roth IRA. And the exact rule that applies depends on whether or not you’re age 59 1/2, the distribution was taken from a direct contribution, or it involved an IRA conversion.

Roth IRA Conversions
The second five-year rule we’re going to cover in this publication deals with Roth IRA conversions - or, more specifically, traditional IRA accounts that are converted to into a Roth IRA. Once again, this rule has to do with qualified distributions, and an additional 10% tax penalty applies if this rule is not followed.

If you convert a traditional IRA into a Roth IRA, then you must wait at least five years from the first day of the tax year in which you made the conversion before you can take a qualified distribution. For example, if you convert a traditional IRA on March 30, 2010, then the five-year clock starts on January 1, 2010.