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SactoFool asks:

<<There are a number of complex issues in this message so let me try to simplify my questions.

1) Do I understand the rules regarding removing money from a Roth prior to age 59-1/2 due to disability correctly? (I hope not to need to, but one never knows....)>>


No, you don't quite understand the rules. You may take your annual contribution money at ANY time for ANY purpose free of taxes or penalty. You may take the earnings free of tax or penalty for the purposes of disability after the account has been open for five tax-years. If earnings are touched before then, they are taxed but not penalized.

<<2) Since my LTD insurance & Mortgage Disability insurance premiums are/will be paid with after-tax dollars, will their eventually payments really be tax free?>>

As regards LTD, the answer is generally yes. However, if your employer paid any part of the LTD premium, then the amount you may receive tax-free may be limited based on your employer's premium payments. I'm not sure about mortgage disability insurance payments, but my guess is they would be treated like your disability payments.

<<3) If my LTD, Mortgage Disability & SSDI procedes are all non-taxable (and even if they aren't) how will that affect the taxability of a Roth conversion? And can other tax/deductions be used to further shelter Roth conversion ammounts from being taxed? (Such as the mortgage interest deduction, assuming I can still claim it even though the Mortgage Disability policy would actually be paying it...)>>

Your ability to convert to a Roth is contingent on your modified AGI, and that may include benefits received from Social Security. Your tax deductions don't enter into that computation. See IRS Publication 590 (Individual Retirement Arrangements) for details, which is available at http://www.irs.ustreas.gov/prod/forms_pubs/index.html.

<<Even references to IRS publications <shudder> or more appropriate TMF boards will be greatly appreciated!>>

You may want to pose these questions on the Tax Strategies board where the tax experts reside.

Regards..Pixy
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