5 year IRS Roth Rule – word “original” mean

Submitted by helen roland on Mon, 2020-03-02 19:34

I have an existing Roth invested for 8 years in a Jackson Roth annuity. December 2019 I retired and I rolled over from a federal government voluntary contribution account new money of $279,000 and converted to a Roth savings account in a bank.
I want to move this new Roth $279,000 as direct transfer to the stock market. I was told by an Ed Slott financial advisor that this new Roth of $279,000 does not go under the 5 year rule, since I had in existence and “original” 8 year old Jackson Roth Annuity. This does not make sense to me. Does all the future stock market gains I will make from $279,000 have to exist for 5 years to be tax free gained money to me and thus my son upon my death? Or, does the 8 year old Jackson Roth annuity count as the “original” Roth established? The IRS Roth 5-year rule states “original”… ?



Submitted by Alan - IRA critic on Mon, 2020-03-02 21:59

  • If you have reached 59.5, all your Roth IRAs are now qualified and tax free. While you should probably transfer the 279k Roth IRA out of the bank before they sell you yet another annuity, you will need to transfer to a brokerage Roth IRA in order to have access to all kinds of stock and bond market investments, many with very low fees and with 0 commissions. The 3 largest IRA custodians in the US are Fidelity, Schwab, and Vanguard. Since your Roth is qualified (if over 59.5), all future gains are also tax free, and you do not have to keep track of the amount of your contributions or earnings.
  • When your Roth accounts are inherited, they will also be totally tax free to your beneficiaries. Under the Secure Act however, your son will have to drain the inherited Roths by the end of the 10th year unless he is disabled or chronically ill. But since the distributions will be tax free, it would be to his interest to not drain the Roth too fast since it will be generating tax free gains until it is drained. Finally, you might ask Jackson what options your son will have when he inherits the Roth annuity if he is not allowed to keep it for the 10 years.

Add new comment

Log in or register to post comments