No. Since you will be at least age 59 ½ when the distribution occurs, the http://retirementdictionary.com/definitions/earlydistributionpenalty 10 % penalty will not apply.
Here is a good way to look at it:
Would the 10% penalty apply if the amount was withdrawn from the traditional IRA? If the answer is no, then the 10% penalty does not apply to the Roth IRA. If the answer is yes, then we would need to look at how much the converted amount has aged. If it has aged for less than five years, then the 10% penalty will apply unless you qualify for an exception.
In your case, the answer is no- the 10 percent penalty would not have applied had you left the amount in your traditional IRA and taken a distribution from your traditional IRA, because you are at least age 59 ½. Therefore, the 10% penalty would not apply to any distribution taken from any of your Roth IRAs.
Since you are at least age 59 ½ and your first Roth IRA was established more than five-years ago, all your Roth IRA distributions will be qualified and therefore tax and penalty-free. A http://retirementdictionary.com/definitions/qualifieddistributionrothira qualified distribution is one that meets the following two requirements:
1. It occurs at least five years after the Roth IRA owner contributed to his/her first Roth IRA (for instance, if an IRA owner contributed to his/her Roth IRA for 2007, this five year period begins January 1,2007, providing the 2007 contribution is made by the deadline (generally April 15,2008)…and
2. Meets one of the following requirements
A. Occurs on or after the IRA owner reaches age 59
B. Occurs as a result of the Roth IRA owner being disabled (within the meaning of http://retirementdictionary.com/definitions/internalrevenuecode Internal Revenue Code Section 72(m
C. Is distributed to the beneficiaries of the Roth IRA owner as a result of the Roth IRA owner being deceased
D. Is used towards the purchase of a first-time home for the IRA owner or an eligible family member (limited to $10,000 for the IRA owner’s lifetime)
Therefore, since you are eligible for a qualified distribution from your Roth IRA, you need not be concerned with whether your conversion has aged for five years. The http://retirementdictionary.com/definitions/orderingrulesrothira ordering rules no longer apply to you, and all your Roth IRA distributions will be tax-free and penalty-free.
Your only concern now is whether it makes good financial sense to withdraw funds from your Roth IRA, especially since any earnings will accrue on a tax-free basis. It may be a good idea to talk to a competent
financial advisor. Your financial advisor should be able to help you decide if you should use funds from your other accounts/assets before withdrawing from your Roth IRA, or if it makes good financial sense to start tapping into your Roth IRA now. The answer will likely depend on your financial profile and your retirement horizon.
Question answered by http://www.applebyconsultinginc.com/ Denise Appleby