Roth Conversion 5-Year Clock
If you are converting assets from a TIRA to a Roth IRA account after age 59.5, there is a 5-year clock for each conversion to be able to withdraw earnings tax-free; obviously, no 10% penalty to worry about. Each conversion has a 5-year period to start withdrawing tax-free earnings, with regular contribution Roth account 5-year start date having no bearing on the conversion 5-year periods.
I also thought that a Roth IRA regular contribution has nothing to do with the conversion 5-year rule, but I am reading contrary replies on this forum.
Thanks,
Joe
Permalink Submitted by Alan - IRA critic on Tue, 2023-04-11 16:22
Permalink Submitted by Joseph Carbone on Tue, 2023-04-11 16:46
Based on the Bogleheads chart, if they’re making a conversion over age 59.5 and it’s their first Roth account, which would be less than 5 years since opening their first Roth IRA, they would need to wait 5 years for earnings to be tax-free, correct?
Permalink Submitted by Alan - IRA critic on Tue, 2023-04-11 19:06
Yes, that is correct. But they are starting with no earnings, so the balance will be mostly the conversion contribution. As long as they withdraw no more than the conversion amount, the distribution will be tax and penalty free. If they withdraw more than the converted amount, then earnings are being distributed and subject to tax, but no penalty.
Permalink Submitted by alan smithee on Mon, 2023-12-11 07:33
.