Starting New Roth IRA with Conversion… 5-yr rule…?
Hello,
I’ll be in a low tax bracket this year and thinking to take advantage of it by doing a Roth Conversion. I would like to have the new Roth with a particular broker, with which I already have a personal 401K (keogh) account and traditional IRA account, but no Roth accounts. The simplest mechanics would be to convert some of my existing TIRA with that broker into a Roth.
I am 64, so no 59.5 regulations will interfere. However, I understand that you cannot take earnings out of a Roth until 5 years after opening the account. I have seen some claims that this does not apply if you are over 59.5, but I’m not sure.
1) So that’s my first question… does that 5-year rule apply if you’re over 59.5…?
2) If it does, then I may have a work-around. I could transfer part of an existing Roth IRA to this broker, which presumeably would come with it’s old start-date (more than 5 years ago), then add to it with the new conversion. Will this work, and give me immediate access to all the earnings in the new account…? Or would only the earnings from the “old” assets be accessible without penalty…?
Thanks…!
Permalink Submitted by Alan Spross on Tue, 2007-11-27 23:54
1) Yes, it does. The 5 years starts with your first Roth IRA account, whether created by a regular contribution or a conversion. Since you already have a Roth opened over 5 years ago, ALL your Roth distributions will be qualified and totally tax free.
2) Therefore, there is no need to make any changes intended to address the 5 year period for each account. When your first Roth account meets the 5 year requirement, they all do. Your new conversion will be accessible tax free the next day if you wish.