Roth IRA Conversion and Earnings

Submitted by Scott Carbaugh on Tue, 2018-02-06 18:54

When does the 5 year rule for tax free earnings withdrawals end?

For example: A 60 year old person completes a Roth conversion on December 31, 2016.

What date would he be able to withdrawals the earnings tax free?

Any difference if were a contribution versus conversion?



Submitted by David Mertz on Tue, 2018-02-06 19:20

  • Since this person is over age 59½, distributions from this individual’s Roth IRAs will be qualified distributions, entirely tax free, 5 years after the beginning of the year for which the individual first contributed to a Roth IRA, either by regular contribution, by Roth conversion or by rollover from a qualified retirement plan.
  • If this Roth conversion completed on December 31, 2016 established this person’s first Roth IRA, January 1, 2021 would be the first day that distributions from this person’s Roth IRAs would be qualified distributions.  Prior to that, only the amount converted, which comes out first, would be tax free.  Earnings distributed would be taxable.
  • If the first year for which this individual made a contribution to a Roth IRA was 2013 or earlier, any distribution made now is a qualified distribution.

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