By Roy Larsen, CFP®, AAMS®
Q: If I use the Roth backdoor technique when I'm less than 59 years old, do I have to pay a 10% penalty on the converted amount?
A: Great question! No, there is no penalty to convert as you aren't taking a distribution. To maximize the conversion, use outside assets to pay whatever tax may be due. If you take taxes from the traditional IRA, you may water down the effectiveness dramatically.
It should be noted that if you withdraw funds from the converted Roth IRA within 5 years of the conversion, the 10% penalty will apply. There are no exceptions to this. Good luck!
Roy Larsen, CFP®, AAMS® is a Fee Only Certified Financial Planner practitioner and acknowledged fiduciary. He works with clients in the Gainesville, GA. area outside of Atlanta and throughout the United States. Larsen Wealth Management specialized in the distribution phase of retirement or your version of chapter two. Roy has been quoted in the Wall Street Journal as well as the New York Times and has won the 5-Star Professional award for 6 consecutive years as one of the top Wealth Managers in Atlanta. Roy can be reached at 678-696-8755 or roylarsen @investinretirement.net.
The opinions voiced in this material are for general information purposed only and are not intended to provide specific advice or recommendations for any individuals(s). To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Roy Larsen is a Certified Financial Planner™ practitioner and Fee Only Wealth Manager who resides outside of Atlanta, Georgia.
Roy's Financial Blog contains articles on the multiple and complex issues of living successfully in Retirement. There are additional resources on our educational website, www.successfulretirementinstitute.com.