a 2nd Roth Account – good or bad idea?

Submitted by Ken Maier on Mon, 2020-10-26 11:54

Hi – I want to convert some IRA $’s to my “old” existing Roth (created in 2012). After the conversion, I want to be able to invest those converted funds when there are significant dips in the market. Presently my “old” Roth acct is managed by Vanguard and VG tells me that if I convert funds to the “old” VG managed Roth acct the converted funds will be automatically invested a few days later per the existing allocation, regardless of the market conditions. Vanguard suggested opening another “new” Roth account (self-managed) so I can pick and choose the buy low strategy. Is this a good or bad idea?, especially considering the 5-year rule?



Submitted by David Mertz on Mon, 2020-10-26 13:32

  • With regard to the 5-year rule for being eligible to take qualified distributions from your Roth IRAs and the 5-year rule for the distribution of converted amounts to be penalty-free, it doesn’t matter what Roth IRA account receives the conversion.  All of your Roth IRA accounts are treated as a single Roth IRA account for these purposes.  It’s reasonable to choose the receiving Roth IRA account based on investment options.
  • Since your first Roth IRA was established in 2012, you’ve already met the 5-year period for qualified distributions.  The only remaining requirement for qualified distributions would be that you reach 59½ or over or become disabled.  If you are already age 59½ or over, the 5-year rule for conversions also no longer applies and any distributions from any of your Roth IRA accounts will be tax and penalty free distributions.

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