5 year rules
Which if any 5 year rules apply to someone that is over 59-1/2. Sometimes I read 5 years or over 59-1/2 and other times it is 5 years and over 59-1/2. I am interested in withdrawals and conversions.
Immediately. However, gains on her conversion will be taxable (but no penalty) if she takes out the gains in the first 5 years. Her gains would come out last.
Is the principal deposited into a ROTH ALWAYS available tax and penalty free? THis is not a conversion.THanks
Regular Roth contributions and any Roth 401k basis rolled into a Roth IRA are both immediately available tax and penalty free.
Permalink Submitted by Alan - IRA critic on Mon, 2021-04-05 17:28
These are 5 year Roth IRA holding periods. The 5 year rule technically only applies to RMDs.
There are 2 different Roth IRA holding periods. One for determining when the Roth IRA is qualified and fully tax free, and the other is a conversion holding period required to avoid a 10% penalty on conversion distributoins.
Reaching 59.5 will end all conversion holding periods not completed. The “5 years or over 59.5” describes the conversion holding period since either of the two will end the penalty.
“5 years AND 59.5” are requirements for the Roth to be qualified for income tax purposes. Once both requirements are met all distributions from the Roth will be non taxable, and also not subject to penalty.
Permalink Submitted by WILLIAM HOSTETLER on Mon, 2021-04-05 20:29
Thank you. What I really want to know is: if my Mom (age 75) opens her first Roth IRA from funds she converts from her traditional pretax ira (I understand she will need to pay the tax on the converted amount), how long before she can take funds out of the Roth IRA taxand penalty free (immediately or after 5 years)?