ROTH Five-year holding period
I am 85 years old, and starting in 1998 I began converting part of my Traditional IRA into a Roth IRA. I now have about 90 percent of my assets in one Roth IRA with Fidelity. I now convert a very small amount of my total assets from the Traditional IRA into the same Roth each year to reach the top of the 15 percent federal income tax bracket. I have been doing this with the belief that once the original Roth IRA was 5 years old, I (or my spouse beneficiary) could withdraw any or all of the amount in the Roth IRA tax free. I recently read that “There is a separate five-year holding period for each Roth IRA conversion”. This could certainly complicate the tax calculation on the withdrawal of earnings on portions of the assets in the Roth that have not been converted for five years. Does the IRS really restart the holding period for earnings on assets converted into that Roth IRA within the last five years?.
Permalink Submitted by Alan - IRA critic on Mon, 2016-01-18 19:58
No. Your Roth IRA is long since fully qualified. That means your entire Roth can be distributed tax and penalty free at anytime. You also no longer need Form 8606 to report any distributions. While the 5 year holding period never applies to a qualified Roth like yours, it also does not apply anytime after age 59.5. Therefore, you can ignore all holding periods for your Roth because none of them apply any longer. Remember that if you want to convert more of your TIRA, you must first complete the annual RMD, and then convert additional amounts if you wish. No portion of the RMD can be converted.