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Not sure what made you think I said there's a penalty on conversion to Roth

I didn't think you said that. 2gifts was talking about early withdrawal penalty. Here is the whole sentence instead of your parsing:

What should he do with that 401k money? If they send it to him as a distribution, will he only pay taxes on it, or is there also a penalty? If a penalty, then could he just roll that over to an IRA to avoid the penalty? If no penalty, I would think that paying the taxes on it now and putting it in his Roth IRA would be a better choice for him.

From what I read in that sentence, the word penalty in the last sentence which starts with "If no penalty" is still referring to the early withdrawal penalty. So again that's why it seemed strange your response had "that sounds best" after that sentence.

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