Roth IRA 5 Year Rule
Hi,
I have a married couple that are clients. Both opened and funded their first Roth IRA with a 2018 Roth IRA contribution (at this time husband was 65 and wife was 66). Over the last several years the wife has been doing IRA to Roth IRA conversions every year in addition to her contributions.
I know she can take her contribution principal at any time without tax or penalty. And she hast to let the Roth IRA age 5 years to take all contribution earnings tax free (this will be satisfied in 2023).
She did a conversion in 2018, 2019, 2020 and 2021. Since she is over 59 1/2, I know she can take the principal from the conversion out of her Roth IRA at any point with no tax and no penalty. Can she only access earnings tax-free on Roth conversion money after that specific conversion has aged 5 years. So she can take earnings on her 2018 conversion in 2023, 2019 conversion in 2024, etc.? Or does this 5 year rule for Roth conversion earnings only have to be satisfied once in her lifetime (which would mean in 2023 whether she is accessing contributions, conversions or earnings, it all can come out tax free)?
Permalink Submitted by Alan - IRA critic on Wed, 2021-09-29 20:47
The latter. Come 2023 the entire Roth balance can be distributed without tax or penalty including all earnings. Form 8606 would not apply either with it’s breakdown of regular and conversion basis after the Roth is qualified. Distributions go directly on Form 1040, line 4a, nothing on 4b.