Ask the Expert: Roth money taxed going in

I have $90,000 in an IRA. I know I'll be taxed heavily on any withdrawals. I need money for improvements in my second home outside New York. I've read if you put money in a Roth IRA, you must wait five years to withdraw it tax-free. But I'll soon be 66. At my age, if I transfer my money to a Roth IRA, must I still wait that long?

No. But that won't solve your problem.

If you're older than 591/2 when you convert a traditional IRA to a Roth IRA, you can withdraw the converted amount tax-free right away. If you're younger, you'll owe a 10 percent penalty on withdrawals taken within five years of the conversion. But you can only withdraw this money tax-free because you've already paid taxes on it -- either when you did the conversion, or because it was originally a nondeductible IRA contribution.

(When you make annual contributions to a Roth IRA, as opposed to converting a traditional IRA, you can withdraw them tax-free immediately, regardless of age. You can't withdraw their earnings until you're 591/2 and have owned the account for five years. But of course, if you keep withdrawing your contributions, your Roth won't have any earnings.)

If you convert $90,000 from your IRA to a Roth IRA this year, your 2012 taxable income rises by $90,000. It would be less expensive just to tap your traditional IRA for the amount you need for home improvements. The good news is that depending on the amount, you may only have to pay a federal tax on your withdrawal: After age 591/2, New York State residents can withdraw up to $20,000 a year from their retirement accounts tax-free.

The bottom line Money going into a Roth IRA is taxable, regardless of your age.

Websites with more information 1.usa.gov/z1Yoa8 and

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