Roth IRA 5 yr. tax Rule
I am getting my taxes done by a CPA and I told him I have a Roth IRA that is 5 years old this year, so any distributions are tax free. The CPA is not so sure that is correct. He thinks that it cannot be that once the Roth is 5 years old you can take money out tax free regardless of when you put it in. In his words “it can’t be that you could have put say $10.000 in last year and made a good investment so now you have $20.000, You can take out the whole 20K tax free because the Roth is 5 years old.” I told him that’s the way I understand it.
Can you please confirm that if I opened a Roth in December 2019, I could withdraw funds including any gains anytime this year. Meaning I don’t have to wait until December. And regardless of when the contribution or conversion was made.
Permalink Submitted by Alan - IRA critic on Sun, 2024-03-03 14:55
If your first Roth contribution was in 2019 or earlier, the earnings in the Roth IRA will be tax free only if you are also age 59.5 or disabled. Otherwise, only the amount of your regular contributions can be withdrawn tax and penalty free. Conversions can be withdrawn tax free anytime, but those not held 5 years will incur a 10% penalty unless you are over 59.5.