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<<I opened a contributory Roth IRA for 1998.>> it.

<< Can I now convert a regular IRA directly into this account?>> problem. I don't know if you WANT to...but you certainly are able to. You might want to read my musings about how many Roth IRA accounts that you really want.

<< If I make this conversion (of the regular IRA to Roth) in the year 2001, can I avoid the 10% penalty on the converstion if I withdrawl the converted amount after Jan 1, 2003? ie. when does the five year clock start ticking on the conversion money? Note: I will be younger than 59.5 in 2003.>>

The five year clock begins to tick on January 1 of the year of conversion. And it's a five TAX YEAR clock...which is different than a straight five year clock. If you convert in 2001, the earliest that you could take the converted funds out would be January, 2005. And that's regardless of your current age.


Have I been asleep or did you not say in a number of other postings that the 5 year window starts with the first Roth IRA that is established? The way the law was originally drafted, converted IRA's were treated differently from contributory IRA's but that law was changed to start the 5 year clock at the first Roth IRA contribution or conversion. In this case, a contributory IRA was established in 1998, so all withdrawals after Dec 31, 2003 should be qualifying.

That's the way I understand it. This is what pub 590 from the IRS says:

"A distribution is not a qualified distribution if it is: 1) Made within the 5-year period beginning with the first year for which either a regular or a conversion contribution was made to a Roth IRA set up for your benefit." ...

If the distributions are not more than the original amount of contributions and/or amounts rolled over, then there is no penalty once the 5-year window has passed.


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