systematic roth coversion
Individual age 62 is planning to start converting 30,000 per year from TIRA to Roth until age 70. If he open one Roth and each year puts the converted funds in will his 5yr rule start when opening the Roth and end 5yrs later or will he have a different 5yr time period for each sum that is converted.
Permalink Submitted by Ben Meyer on Fri, 2015-02-13 15:09
The five year waiting period for Roth qualification will begin on January 1 of the year of the first deposit to any Roth IRA account opened by the individual in question. Any later conversions or deposits will not restart the clock. This assumes that the Roth IRA is for the individual himself/herself and is not an inherited Roth IRA.
Permalink Submitted by Alan - IRA critic on Fri, 2015-02-13 18:04
Benn addressed the 5 year holding period for a Roth to become qualified resulting in earnings being tax free. If you were concerned about the individual Roth conversion 5 year holding period to avoid penalty, that no longer applies after age 59.5. The conversion funds could be withdrawn anytime without tax or penalty.
Permalink Submitted by Ben Meyer on Sun, 2015-02-15 04:06
Alan’s comment is a good insight. This is due to the fact that a distribution from a Roth IRA before qualification withdraws basis first. In contrast, a traditional IRA distribution withdraws both basis and earnings, with each as the proportion they bear to the Traditional IRA total fair market value as of the previous December 31. (See form 8606.) And also, for a plan holder over 59 1/2, there is no 10% early distribution penalty.