ROTH IRA
Are there there are penalties if the Roth is set up and the money is not held in it for at least 5 years?
Does the 5 year rule apply to each deposit or just to the IRA as a whole? (I believe it is just inception of the ROTH and not each deposit)
An inherited ROTH IRA for a child is the same as a traditional IRA (10 year rule) correct? However the money is tax free, what is the ROTH IRA is established and funded and then 2 year later the owner dies and the beneficiaries are the children?
Permalink Submitted by Alan - IRA critic on Mon, 2021-10-25 13:43
The 5 year holding period for a Roth to be qualified starts with the year that the first contribution is for. Regular Roth contributions can be withdrawn anytime without tax or penalty.
If children of the owner inherit a Roth IRA and they are minors, they can take annual life expectancy RMDs until they reach the age of majority, after which the 10 year rule kicks in. An inherited Roth becomes qualified once held for 5 years from the deceased owner’s first contribution and after that the entire balance is tax and penalty free including earnings. Before the 5 years is attained, the regular contributions and any conversions done can come out tax and penalty free.