Roth IRA
5 year rule with withdrawing funds. When does each 5 yr window start? When the account is opened or when a contribution is made? For example, if an IRA account is opened with $100 in year one (2018). Then two years later (2020), a contribution is made of $2,000. When can the principal be taken out? Five years from 2018 or 2020?
Permalink Submitted by Alan - IRA critic on Tue, 2020-03-03 23:14
A regular Roth contribution can be withdrawn anytime without tax or penalty. The 5 year year period with respect to the Roth becoming qualified (along with reaching 59.5) starts on January 1 of the tax year the first Roth contribution is for. For example, if a 2019 Roth contribution is made from now to 4/15/2020, the 5 year holding period started 1/1/2019. Taxable conversions are subject to a different 5 year holding period to avoid the 10% penalty if the conversion is withdrawn.