Roth Conversion 5 year rule

Submitted by MIKE KRUCHTEN on Tue, 2020-11-24 02:45

Client is 72 and considering converting some Trad IRA funds to his Roth IRA in 2020. Roth IRA was established 10 years ago via contributions. My understanding is any funds converted must wait 5 years even thou he has met 5 year on contributions. If this is accurate and he processes another conversion in 2021 then the 2021 conversion can use same 5 year start date as 2020 Roth conversion for 5 year rule?

I feel I read somewhere each Roth conversion has its own 5 year period but feel this may be for those under 59.5.



Submitted by Alan - IRA critic on Tue, 2020-11-24 02:57

These conversion holding periods no longer apply after age 59.5 whether the Roth is qualified or not. In this case the Roth is fully qualified since the first contribution was 10 years ago, and any conversion done now can be distributed anytime without tax, penalty or any holding period.

Submitted by MIKE KRUCHTEN on Tue, 2020-11-24 03:13

If client was under 59.5, let’s say age 40. Does each conversion then have it’s  own 5 year hold period? 

Submitted by Alan - IRA critic on Tue, 2020-11-24 04:15

Yes, each conversion would then have it’s own 5 year holding period for purposes of the 10% penalty on the taxable portion of such conversion.

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