5 year rules Roth Distribution clarification
Apologize as I know this has been covered, but i would like to provide specific client fact scenario to give answer to my client
Client, age 64, in 2o20 opens a Roth IRA for the first time and converts $40,000 from their IRA to the Roth IRA.
In 2021 client converts additional $57,000 to the Roth IRA.
On January 3, 2025, the account is valued at $162,000. Client is now age 68
If client withdraws entire amount in 2025 is there any income taxes and penalty due on the distribution?
If the answer is yes, then how much of the account can be withdrawn tax free and if any of that amount includes earnings attributable to the tax free portion , how is the earnings part calculated?
Thank you
Howard
Permalink Submitted by Alan - IRA critic on Sun, 2025-01-05 17:59
Client’s Roth became fully qualified on 1/1/2025 the date on which the 5 year holding period was satisfied and client is over 59.5, so the entire balance could be distributed tax and penalty free.
Permalink Submitted by Howard Hook on Sun, 2025-01-05 19:51
Thank you as always Alan
Howard