Today TaxMama hears from Michelle in the TaxQuips Forum who wants to know. “If someone 68 years old rolls over funds from thrift plan (taxed at 20%) into a Roth IRA, will there be any additional tax due? And is there a specific length of time funds must remain in a Roth IRA before being withdrawn?”
Typically, when you move the funds from a retirement account into a Roth IRA, the only taxes you pay are the taxes due on the funds that were rolled over.
Then, you are not allowed to touch the funds in the Roth IRA for 5 years. If you do, you will pay taxes on the earnings of the funds you draw.
However, if you leave the money alone for the 5 years, you will never pay tax on the earnings at all.
And remember, you can find answers to all kinds of questions about IRAs other tax issues, free. Where? Where else? At www.TaxMama.com.[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]
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