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If your mother is still working for the employer sponsoring the 403(b) then she will not be required to take a distribution while she continues to work and she can also continue making contributions. Once she retires she will be required to begin taking minimum distributions. She is not permitted to required minimum distribution amounts to a Roth IRA.
She can convert to a Roth IRA this year but she will have to pay taxes on the conversion. If she converts in 2010 she has the option of spreading the taxable income from the conversion equally over the next 2 years (2011 and 2012) rather than paying tax on the entire amount in 2010. Spreading the conversion income over the following 2 years will defer the taxes and may also reduce them by possibly eeping her in lower brackets as compared to reporting the conversion all in 2010.
Thank you for the quick response. I understand everything that you stated but could you clairfy where you said...She is not permitted to required minimum distribution amounts to a Roth IRA.
And additionally, could she convert to a regular IRA and then roll over to a Roth and not touch it for 5 years will out penalties? Or does this not help at all? I thought I read something else online about possibly doing this.
I'm sorry I omitted a word. It should have read "She is not permitted to convert required minimum distribution amounts to a Roth IRA".
Yes, she could directly roll over to a regular IRA and then convert to a Roth IRA. After the IRA is converted, she could take withdrawals of the converted amount prior to 5 years without implications because she would have already paid taxes on the converted amount. However, she would have to leave the earnings in the account for 5 years before they can be withdrawn tax-free.