if someone under age 59 1/2 wants to take money out of a Traditional IRA, they would have to pay a 10 % penalty and taxes. But what if they converted the Traditional IRA to a Roth IRA first? (and they can maybe convert only the amount they need). Then – as I understand Roth IRAs – there is no 10% penalty to withdraw from a Roth. Is this true?
Also, Can you w/d from a Roth anytime without incurring or do you have to wait 5 years after conversion?
What you propose looks like a loophole to avoid the 10% penalty, but in fact there is no loophole. your converted money has to sit in the account for five years before you can take the money out without penalty (and then only if you are age 59.5 or older, or meet another exception).
There are circumstances when there is a 10% penalty on distributions from a Roth IRA. For example, if you take out earnings before age 59.5 (and you do not meet another exception such as disability), you will pay a 10% penalty. and as mentioned above, if you take out converted amounts there may be a 10% penalty if the money hasn't been in the account for five years, or you are under age 59.5 or do not meet one of the other exceptions.
When you convert the money from a traditional to a roth you must pay the taxes on the money. You are going from a pretax situation to a post tax situation.
You can't withdraw money from a ROTH without penalty.