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DownwardSpiral Wrote:
<<I'm in a similar situation, having just opened an IRA for a 16-year-old. I want to roll it into a Roth, but it would be silly to leave this amount segregated by itself for 50 years. ...>>

Pixy replied:
<<Not 50 years, just 5. After five tax-years, the conversion IRA is just like a contributory IRA in that the rollover is now free to be withdrawn without penalty. Therefore, there is no reason in the world after the five years has run to keep that money in a separate account.>>

I've reviewed several ROTH agreements. None
of them say the segregation requirement expires
in 5 years. This is not a great concern. If the law
remains unchanged, I expect custodians will amend
the agreement when this becomes an issue in 2003.

I am concerned that the segregation requirement
gives congress a 5 year window to pass 'technical
corrections' with further distinctions between
rollover and contributory ROTHs. These may
harm people with mixed accounts or who were
planning to combine small accounts. The congress
critters can say "It's your own fault - you were
warned to keep them separate."

This is particularly likely as the rationale for
separate accounts is paper thin. The IRS could
have achieved the same result, without making
people jump through hoops, by using a different
order for withdrawals from mixed ROTH accounts.
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