Roth IRA
If someone has established a Roth IRA over 5 years ago and then at a later point in time they start to do Roth Conversions how does the ruling on that work? Does the Roth Conversion also have to sit for 5 years before they can start pulling money out of there or since they already established a Roth years before does that meet the requirements for all Roth moneys(granted I still know they have to be over 59.5 years old)?
Thanks
Permalink Submitted by Alan - IRA critic on Thu, 2015-02-19 19:54
The first Roth contribution of any type (regular or conversion) starts the 5 year holding period for determining when the Roth is qualified and totally tax free including earnings. There is also an additional 5 year holding period that applies to conversions and must be met before the taxable portions of those conversions can be withdrawn without a 10% early withdrawal penalty. Therefore, Roth IRAs are subject to two different 5 year holding periods for entirely different purposes. When the first one is met, the second one is automatically met because the taxpayer must have reached 59.5.