I have several Roth IRA conversions, each with different custodians. When I spoke to an IRS representative, he maintained that the total amount of the conversions is always available. He told me that at any time I can take out what I had paid taxes on (wi

By Denise Appleby AAA
A:

It is true that at any time you may take out (distribute) the amount you converted without paying tax on the amount because you already did when the amount was converted. However, if you are under age 59 ½ and it has been less than five years since the conversion occurred, the amount will be subject to the 10% early-distribution penalty - unless you qualify for an exception. If it has been less than five years since your first Roth IRA was established and funded, then any earnings you receive as a distribution will be subject to both income tax and the 10% early-distribution penalty, unless, again, you meet an exception (including reaching age 59 ½).

The following is a quick run-down of how Roth IRA distributions are taxed:

  • Regular contributions (distributed first) are always tax and penalty-free.
  • Roth conversions (distributed after contributions are used up in other distributions) are always tax-free. However, they are penalty-free only if it has been five years since the amount was converted or if the Roth IRA owner meets an exception.
  • Earnings are subject to tax unless the distribution is qualified. If the distribution is not qualified, the earnings also will be subject to the 10% early-distribution penalty unless the Roth IRA owner meets an exception.

This question was answered by Denise Appleby
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