5 Year Rule
Need clarification. My understanding is that ALL conversion principal can be withdrawn tax free at anytime even during the five year waiting period. Only the interest earned if removed would be taxed.
Need clarification. My understanding is that ALL conversion principal can be withdrawn tax free at anytime even during the five year waiting period. Only the interest earned if removed would be taxed.
Permalink Submitted by Alan Spross on Fri, 2009-10-30 22:59
There are two totally separate 5 year holding periods.
1) For the Roth earnings to be qualified for tax free distribution, along with reaching 59.5 – this starts with the first Roth contribution of any type, regular or conversion
2) For Roth conversions to be penalty free (10% early withdrawal). As you stated, they are already tax free. This period starts with the year of each particular conversion.
Would need to know when the holding periods began to determine the tax treatment of your distribution here.