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Subject:  Re: Another Roth aspect... Date:  1/14/1998  6:02 PM
Author:  TMFPixy Number:  1308 of 88543


<<This has been rattling around in the back of my mind (lots of empty space in there!) as another reason to convert an existing IRA to a Roth:

Presumably, the entire converted amount would be classified as a contribution. And once the five-year time limit has passed, one would be able to withdraw any contributions without penalty.

So, why not use a Roth as a different type of savings account? Need money for a vacation? A car down payment? An unexpected emergency? The money would be there for you if needed. And if you never needed to tap the account, so much the better.

Assuming one had his/her retirement already well-provided for through other accounts (401k, other IRAs), would there be a problem with doing what I described?>>

As long as you follow the rules and let the converted money sit in a separate Roth account for the five years, then your assumption is correct. Remember, though, that the earnings can't be taken prior to age 59 1/2 without taxes and (in most cases) a ten percent penalty. Additionally, final IRS quidance is still not out. All we know is they want IRA conversions held in separate accounts by the year of conversion, and annual contributions held in a separate account from those. That's because of the penalty precedence on withdrawals stipulated in the technical corrections still pending in Congress. I'm never comfortable in making plans until I know all the rules by which I'll have to play, and those are still under development.

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