Once a Roth IRA
has been in place for five years and the account owner reaches age 59 1/2, distributions are tax-free.
A series of motions followed, and eventually each Jansson family member was assessed an excise tax for excess contributions to a Roth IRA
of $11,793, plus penalties of $4,481.
The concept of rolling over retirement assets into a Roth IRA
is therefore relatively new.
investors tend to be younger, which ICI attributes to the fact that only recently have the rules regarding Roth IRA
contribution limits, conversions and rollovers been eased.
That move: opening a Roth IRA
when a son or daughter is very young and contributing a few hundred dollars to it every month.
The reports -- "The IRA Investor Profile: Traditional IRA Investors' Activity, 2007--2014" and "The IRA Investor Profile: Roth IRA
Investors' Activity, 2007--2014," which both use data from ICI's IRA Investor Database -- also found that withdrawal activity is lower, equity holdings are higher, and investors tend to be younger in Roth IRAs
than in traditional IRAs.
Also, although the premature distribution tax (for IRA withdrawals prior to age 59/2) does not apply when you convert funds to a Roth IRA
, it may apply if you later withdraw from the Roth IRA
within five years after you convert funds.
One of these potential questions involves the possibility of rolling inherited retirement funds into an inherited Roth IRA
in order to maximize tax-free income options in the future.
How can you use a traditional individual retirement account (IRA), a Roth IRA
, and Section 529 plans for estate planning?
9) There is also no mandatory distribution as there is for traditional IRAs, (10) so the beneficiary of the Roth IRA
may defer distributions to take further advantage of tax-free growth.
Imagine that beginning at age 40 you invest $5,500 of your post-tax income into a Roth IRA
Recharacterization might represent a practical option for taxpayers reconsidering a prior Roth IRA
conversion, especially those who are adversely impacted by market conditions that have materially decreased the value of the converted account.