Call for an APPOINTMENT: (310) 377-0668

By Sarah Brenner, JD
Director of Retirement Education

Question:

I am 83 years old with an IRA rollover account, regular IRA account and a small Roth IRA. If I convert a portion of either the rollover or regular IRA to a Roth IRA and die before 5 years after the conversion, is there any penalty to me or the beneficiaries?  Also, can I convert to the existing Roth IRA or should I start a new Roth IRA?  I do not plan to make any withdrawals from any Roth IRA. Does it make a difference from which IRA I convert funds?

Thank you for your response,

George

Answer:

Hi George,

You can convert either the regular IRA or the IRA that was funded by a rollover. From a tax perspective it will make no difference. Unless you have some after-tax dollars in either IRA, the conversion will be fully taxable. You can also add the conversion to your existing Roth IRA. Starting a new Roth IRA would have no tax benefit.

When it comes to distributions to your beneficiaries, there would be no 10% penalty regardless of whether a five-year period has been satisfied. That is because the 10% early distribution penalty never applies to distributions from inherited IRAs. The only issue would be that your beneficiaries would have to wait out your five-year period to receive a qualified tax-free distribution of earnings.

Question:

If I have a client (husband and wife filing jointly) with earned income. Can they continue to contribute to a Traditional IRA beyond age 73?

Thank you,

Curt

Answer:

Hi Curt,

The SECURE Act brought good news for older individuals with earned income looking to contribute to a Traditional IRA. Starting for 2020 contributions, the rule prohibiting contributions once an individual reaches age 70 1/2 no longer exists. If your clients have earned income they can go ahead and make Traditional IRA contributions regardless of their ages.

https://www.irahelp.com/slottreport/roth-conversions-under-secure-act-todays-slott-report-mailbag