5 year period for converted dollars?

[Guest BLRyan]

I'm confused. With the 98 changes, is there still a five year period on converted dollars to Roth IRA that is separate from the 5 year non-exclusionary period based on my first contribution? example: If I open Roth in 1998 (with contribution) then convert traditional IRA dollars in 2000, am I penalized on withdrawal of converted money prior to 12/31/2004???

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B Ryan

[Kathy]

You will be penalized if you withdraw the converted money prior to 1/1/2005 unless you meet one of the known exceptions to the 10% penalty - death, disability, age 59 1/2, first-time home purchase (up to $10,000), qualified education expense, certain medical or substantially equal periodic payments (no less frequently than annually..). Basically, if you would be penalized had you left the money in your traditional IRA and were now withdrawing it, you will be penalized if you withdraw it from your Roth within 5 years of the year of conversion - they closed the loophole that allowed someone who didn't meet one of those exceptions to convert, pay only ordinary income tax and then withdraw penalty free from the Roth, defeating the true purpose of the plan - to save for retirement.