My Wife just retired last month, and has Roth IRAs, and other financial investments. I've talked to her about pulling the Roth out and going all cash as you have. Found out she will have to pay a ten percent penalty, and possibly pay a percentage to the IRS as well, as she retired on disability and is five years younger than the minimum.
Do any of you have any wisdom to throw her way as to what the best road is to save on penalties in converting her assets?
I'm going to talk to my CPA next week about it, but I would love to have some ideas for her to kick around until then from You guys!
JD
If she’s only 5 years away taking out equal payments may be the way to go, but I would hold cash in the IRA itself. Talk to the CPA to make sure.
You mentioned that she's on disability. Disability is an exception to the 59 1/2 year old age rule with Roth IRAs. She should be able to make distributions now with no penalty. However, amounts distributed that have been in the Roth IRA less than five years may be subject to ordinary income tax.
Helpful links: click here and here. The second one looks a tad bit stale, but I didn't see any major changes.
Of course, I'm not a professional, so I may be wrong or have forgotten something, so make sure you consult your CPA and tax preparer before taking any actions, as distributions from IRAs are generally irreversible.