Yes, my Roth is invested in index funds now. It has been for several years.
Ah, yes, the Roth pipeline. I do remember that article, and have looked into it and read lots of other posts on it as well. The part that I'm not sure about is:
Does a rollover contribution from a pre-tax retirement account not count towards my annual contribution limit (currently $5500)? I'm guessing it doesn't. The only catch is that it must sit for 5 years before being able to be spent penalty free, hence the "pipeline".
hmm, I found this snippet in this...
http://www.irs.gov/pub/irs-pdf/p590.pdf, which I think explains how a Roth pipeline is actually possible.
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page 30
"Converting From Any Traditional IRA Into a Roth IRA
Allowable conversions. You can withdraw all or part of the assets from a traditional IRA and reinvest them (within 60 days) in a Roth IRA. The amount that you withdraw and timely contribute (convert) to the Roth IRA is called a con- version contribution. If properly (and timely) rolled over, the 10% additional tax on early distributions will not apply."
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Which says nothing about waiting for 5 years...
but then this is thrown in:
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page 70
"Distributions of conversion and certain rollover con- tributions within 5-year period.
If, within the 5-year pe- riod starting with the first day of your tax year in which you convert an amount from a traditional IRA or rollover an amount from a qualified retirement plan to a Roth IRA, you take a distribution from a Roth IRA, you may have to pay the 10% additional tax on early distributions. You gener- ally must pay the 10% additional tax on any amount attrib- utable to the part of the amount converted or rolled over (the conversion or rollover contribution) that you had to in- clude in income (recapture amount). A separate 5-year period applies to each conversion and rollover. See Ordering Rules for Distributions, later, to determine the re- capture amount, if any.
The 5-year period used for determining whether the 10% early distribution tax applies to a distribution from a conversion or rollover contribution is separately deter- mined for each conversion and rollover, and is not neces- sarily the same as the 5-year period used for determining whether a distribution is a qualified distribution"
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which makes it sound like 5 years of waiting might actually be needed, which seems to be the consensus of most people.
The other part I have not calculated out yet, is how using that pipeline money from IRA to Roth IRA from year 5 of retirement to age 60 would affect the gains on the remaining money to be used from age 60-90. I estimate $2.5M with no pipeline, but that would be reduced if a pipeline existed from age 45-60.
Sometimes you just need to talk it out, although the two points above are still not crystal clear to me. Do I need to wait for 5 years? I've had the Roth IRA open for more than 10 years already.
Tom