How Does 5-year Rule Apply to Multiple Roth Conversions after age 59 and 1/2

Submitted by Todd Kirsch on Tue, 2019-03-26 21:57

Let’s assume someone is OVER 59 and 1/2 years old and converts traditional IRA funds of $100,000 each year for 4 consecutive years beginning in 2019 through 2022. How do(es) the 5-year rule(s) apply to principal and earnings? Thank you.



Submitted by Alan - IRA critic on Tue, 2019-03-26 23:18

  • 5 year holding period for Roth to become qualified – starts 1/1 of the first year of any Roth contribution, regular or conversion. If the 2019 conversion is the first Roth contribution, the Roth will be qualified 1/1/2024, which is when any Roth earnings will become tax free.
  • The other 5 year holding period to avoid the 10% penalty on conversions does not apply at 59.5, so not a factor here.
  • Therefore, all of these conversions can be withdrawn anytime without tax or penalty. Earnings must wait until the Roths are qualified.

Submitted by Todd Kirsch on Thu, 2019-03-28 16:35

Thank you, Alan. To clarify your answer to the hypothetical, the subsequent conversions in 2020, 2021 and 2022 will be subject to the 5-year holding period on earnings that began on 1/1/2019?  In other words, the entire Roth IRA account, including earnings, could be withdrawn tax-free on 1/1/2024?

Submitted by Alan - IRA critic on Thu, 2019-03-28 17:03

Yes, that is correct. Earnings are not broken down to specific contributions in any way. All earnings in all Roth accounts become qualified on the same date, being the latest of 5 years from the first contribution year or reaching 59.5. In this case, 5 years is attained later than 59.5, on 1/1/2024.

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