Roth 5-yr rule and age?

Pub 590 Chap 2 has the following;
Question: What triggers the "may not" as opposed "will or do not"?
IE, question I'm trying to answer is -- if over 60 and were to roll over a traditional IRA (paying tax on the value, of course) is the 5-yr rule null and void for further distribution or not?
Sounds like "maybe, but then again, maybe not" from the above and could find no clarification of why "may" is in the above wording.
Reply to
dpb
Once you reach 59 1/2 the premature distribution penalty will NEVER apply to you, no matter what you do. Don't waste time trying to figure out why IRS used a particular word in a particular sentence. It'll drive you nuts.
Reply to
Phil Marti
In article , snipped-for-privacy@verizon.net (Phil Marti) writes: | | > IE, question I'm trying to answer is -- if over 60 and were to roll over a | > traditional IRA (paying tax on the value, of course) is the 5-yr rule null | > and void for further distribution or not? | | Once you reach 59 1/2 the premature distribution penalty will NEVER apply to | you, no matter what you do. Don't waste time trying to figure out why IRS | used a particular word in a particular sentence. It'll drive you nuts.
Does this mean that the basic 5 year rule (not the conversion clock) has no effect? Example:
Open first/only Roth at age 58 and contribute. Withdraw everything including earnings at age 60. Is there a penalty?
Dan Lanciani ddl@danlan.*com
Reply to
Dan Lanciani

No, but what have you gained? 2 yrs tax free return of the growth. The initial deposit was always available for you to withdraw penalty free anyway. Joe
Reply to
JoeTaxpayer
There is no tax-free growth in this scenario. The distribution will not be "qualified," thus the earnings will be taxable. But no premature distribution penalty since you're over 59 1/2.
Reply to
Phil Marti

Pub 590 confirms Phil's correction to my response. After 59-1/2, no penalty, but the Roth still was subject to the 5 yr rule regardless of the age of the withdrawant.
Joe (sitting here corrected)
Reply to
JoeTaxpayer
In article , snipped-for-privacy@comcast.net (JoeTaxpayer) writes: | | | > Open first/only Roth at age 58 and contribute. | > Withdraw everything including earnings at age 60. | > Is there a penalty? | | No, but what have you gained?
I wasn't thinking so much of planning to do that as of not having to worry about a potential downside (i.e., if you needed the money in an emergency) when starting/contributing late.
Dan Lanciani ddl@danlan.*com
Reply to
Dan Lanciani
(Phil Marti) writes:
No, actually just the opposite effect. The five year conversion holding period ceases to have any effect once you turn 59-1/2. The "basic" Roth holding period applies at any age, even after you turn 59-1/2. If you open a Roth IRA after age 59-1/2 you must still wait 5 tax years to get tax free earnings
No penalty, no tax on contributions, but the earnings are still subject to ordinary income tax until the year you turn 63.
Reply to
Herb Smith
The "usual 10% penalty" is not really a penalty, but rather a SURTAX added to the ordinary taxation of the funds because of early withdrawal.
Reply to
Herb Smith
Only if one thinks of ordinary income tax, say on earnings from a savings account, as a penalty.
-Mark Bole
Reply to
Mark Bole
Not quite, because if he waited an additional 2 or so years (I forget the numbers in the original post), there wouldn't be any tax due at all. So the fact that there is tax due because the 5 years are up strikes me as a kind of penalty.
Reply to
removeps-groups
How is failing to qualify for a special benefit the same thing as a penalty?
By that same logic, anyone who sells capital assets at a gain instead of letting their heirs get a stepped up basis is penalized. Anyone who works full time instead of getting unemployment comp, Earned Income Credit, etc. is penalized. Anyone choosing not to get married or have children is penalized compared to someone with otherwise identical income.
The penalty that really galls me is every week that goes by without me winning the lottery...
-Mark Bole
Reply to
Mark Bole

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