Definitive answer on the 2 year five year rules for ROTH withdraws

Submitted by dan casey on Wed, 2023-05-10 04:01

Every time I think I know the answer, clients send me snipits from other articles from others then makes me question. Can I get a difinitive answer that explains the 2 5 year rules on conversion money and earnings?



Submitted by Alan - IRA critic on Wed, 2023-05-10 15:36

  1. For Roth earnings to be income tax free, you must be 59.5 or disabled and have made your first Roth contribution 5 years ago. Your Roth IRAs are then “qualified”.
  2. For taxable conversion dollars to be withdrawn without the 10% penalty, you must have held the conversion for 5 years OR be over 59.5 or disabled. A “qualified” Roth also satisfies this requirement.

Submitted by dan casey on Wed, 2023-05-10 20:02

An advisor that claims just got back from the Ed Slott Advisory meeting wrote this in an article on his website…”For converted Roth IRAs, the same basis and earnings components exist. However, the difference is regardless of age, Roth converted funds must be held for five years before you can access them without taking on a 10% penalty (five-year rule). “

Submitted by Alan - IRA critic on Wed, 2023-05-10 20:21

Advisor’s statement is incorrect. The 10% penalty does not apply to any distributions of conversions after 59.5. Therefore, age is definitely a factor. 

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