ROTH CONVERSION WITH DRAWAL Clarification

Submitted by David Belk on Sun, 2014-05-18 14:22

In completeing some research this morning I came across some data that indicated that withdrawals on a Roth are not subject to the 5 year rule but “are available on the 1st day of the 5th year”. IRS Pub 590 is not much help and i have not had the time to look directly for subsection of the code. Any comments or can you point me directly to the section of the code?

Additionally, since Im here…part of the resaerch im looking into is withdrawal of converted roth asset for Higher education for children (Parent Roth for Kids education) “inside the first 5 years of the conversion…outside of of 4 years as indicated above in 1st question.”

Thanks for any input!



Submitted by Alan - IRA critic on Sun, 2014-05-18 16:59

  • Qualified Higher Education expenses will waive the 10% penalty for Roth distributions of conversion amounts not yet held 5 years. File Form 5329 and enter exception code 08 on line 2. Be sure you know exactly what qualified for higher education expenses and take the distribution in the same year the expenses are paid.
  • With respect to Roth distributions, regular contributions come out first and are always tax and penalty free. Next out are conversions (oldest first) which are tax free but subject to the 10% penalty if the conversion is not held 5 years. If the conversion was partially tax free due to basis in the TIRA, the pre tax dollars of a conversion come out before the after tax amounts. The conversion 5 year holding period starts 1/1 in the year of the conversion and ends on 1/1 of the 5th year after the conversion year. (example: conversion 6/6/2010, 5 year holding period ends 1/1/2015.) Conversion holding period also ends upon reaching 59.5. See p 71 of Pub 590.


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