Consequences of liquidating ira
If the assets being withdrawn come from earnings and none of the exceptions exists, the penalty will apply regardless of the time period elapsed.
In short, if it has been five years since the assets were converted and the amount withdrawn is less than or equal to the amount converted, no penalty will apply, despite the fact that you are under 59.5. Assume that the amount converted more than five years ago was ,000 and the assets have accrued earnings of ,000.
Any early withdrawals or liquidations of a Traditional IRA will have penalties and be taxed at the ordinary income rate. Since investments are made post tax, withdrawals are tax free in retirement.
By then, your beneficiaries may be the ones making the decisions.
Generally speaking, the Roth IRA holder must be at least age 59.5 when the distribution occurs for it to be a qualified distribution. The answer to your question depends on the source of the assets being withdrawn.
If the source is only converted assets and it has been at least five years since the assets were converted, or if you qualify for one of the exceptions, then the 10% early-distribution penalty will apply.
The tax treatment of a Roth IRA distribution depends on whether the distribution is qualified.
Qualified distributions from Roth IRAs are tax and penalty free, but non-qualified distributions may be subject to tax and an early-distribution penalty (known as an excise tax).