I understand that it is better to pay conversion out of current assets. The question really is this a backdoor technique to penalty free withdrawals if under 59-1/2?Electron wrote:There are two basic ways to do a Traditional IRA to Roth IRA Conversion.
You can pay the taxes from the TIRA which results in a smaller balance transferring to the Roth IRA.
The second option is to pay the conversion taxes from separate taxable assets. In this case all assets transfer from the TIRA to the Roth IRA. This second option is a much better approach if taxable assets are available to pay the conversion taxes.
I don't think any of the money is subject to 10% early withdrawal penalty because it is all part of the conversion. Am I wrong?