ROTH Distribution – 5 year rule
My client has done 3 conversions since 2020.
First conversion of $15,000 done on 2/19/20
2nd Conversion of $25,000 done on 4/3/21
3rd conversion of $15,000 done on 6/1/22
Client is 65 years of age and wants to withdraw $10,000 from her ROTH IRA.
Custodian is telling me she needs to meet the 5 year rule to withdraw funds.
QUESTION: Can she withdrawal without penalies at anytime since it is return of capital?
Does she still need to meet the 5 year rule and be over 59 1/2?
Confused.
Permalink Submitted by Alan - IRA critic on Thu, 2022-11-17 18:29
The conversion 5 year holding periods with respect to the 10% penalty disappear at age 59.5. Therefore, client can withdraw up to 55k with no tax or penalty. If there are gains on the 55k, they cannot be withdrawn tax free until 2025. This assumes 2020 was her first Roth contribution of any type and this is her only Roth IRA. Custodian rep needs additional training.