Tax consequences of liquidating a roth ira fishers of men dating website
In 2018, John is 55 years old, and the balance in John's Roth IRA at that time is represented as follows: John wants to know the tax consequences should he distribute assets from his Roth IRA in 2018.
Remember that assets are distributed in the following order: (1) participant contributions, (2) conversions and (3) earnings.
John established his first Roth IRA in 2016 and made a participant contribution of ,000 a year.
In 2016, he converted his Traditional IRA assets to his Roth IRA.
Because John has not had his Roth IRA for five years, the earnings (,000) will be subject to income tax.
The withdrawal will also be subject to the 10% penalty unless John qualifies for an exception.
But, the penalty may still be waived if John meets one of the exceptions, which include the following: Like the first ,000 distributed in the two preceding examples, the first ,000 here is tax- and penalty-free.
Withdrawn amounts of up to ,000 will be treated as in the example above.Each conversion has its own five-year period: For a conversion that occurs in 2017, the five-year period ends December 31, 2016.For a conversion that occurs in 2018, the five-year period ends December 31, 2017.While these assets are not subjected to income tax, they are subjected to the 10% early-distribution penalty, unless it has been five years since the assets were converted.Unfortunately, it hasn't been five years since John's conversion.
We will use examples of various 2018 distribution amounts from John's Roth IRA to show their tax treatment.