Roth Conversions and How Dividend Income is Treated in Roth IRA
Let me point out that the intent of this thread is not to trigger a debate about total return vs dividend return in retirement.
I have a situation where I have a Traditional 401k with company stock that pays a quarterly dividend. The plan is to start taking dividend distributions during retirement starting at age 60. I realize I would be paying ordinary income tax on the dividend distribution from the Traditional 401k.
So, the question is how I can pay zero taxes on the dividend distributions starting at age 60?
Can I rollover the company stock position in my Traditional 401k to a T-IRA and then do a Roth conversion to a Roth IRA at age 60?
At this point will I have immediate access to the dividend income tax free or does the Roth IRA 5-year seasoning rule apply to dividend income inside a Roth IRA?
Is dividend income inside a Roth IRA treated as qualified distributions and that is why the 5-year seasoning rule apply?
FYI. I will be 58 years old in 2024 and my first ROTH IRA account was created in 2022.
Please advise. Thanks
Let me point out that the intent of this thread is not to trigger a debate about total return vs dividend return in retirement.
I have a situation where I have a Traditional 401k with company stock that pays a quarterly dividend. The plan is to start taking dividend distributions during retirement starting at age 60. I realize I would be paying ordinary income tax on the dividend distribution from the Traditional 401k.
So, the question is how I can pay zero taxes on the dividend distributions starting at age 60?
Can I rollover the company stock position in my Traditional 401k to a T-IRA and then do a Roth conversion to a Roth IRA at age 60?
At this point will I have immediate access to the dividend income tax free or does the Roth IRA 5-year seasoning rule apply to dividend income inside a Roth IRA?
Is dividend income inside a Roth IRA treated as qualified distributions and that is why the 5-year seasoning rule apply?
FYI. I will be 58 years old in 2024 and my first ROTH IRA account was created in 2022.
Please advise. Thanks
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