Confused about 5 year holding period for withdrawal of Converted funds & gains after age 59-1/2
My IRA & ROTH-IRA are both more than 15 years old. I’m age 65. For the past 3 years I converted funds from my IRA to my ROTH-IRA. I am getting conflicting information whether the 5-year look back window for each conversion applies or not in my situation. I’d like to withdraw the entire amounts of my Conversions AND Gains, but only if I can do so Tax-Free AND Penalty-free. Does each conversion require a 5-year holding period before withdrawals can be made or not? help!
Permalink Submitted by Alan - IRA critic on Mon, 2025-05-05 21:56
Because your Roth is qualified (5 years and over 59.5), the entire balance can be withdrawn without tax or penalty.
Tax code: Sec 408A(d)(3)(F)(i) states that a conversion distributed within 5 years is subject to Sec 72(t), which is the section of the code that applies the 10% penalty.
Sec 72(t)(2)(A)(i) then states that the penalty does not apply to distributions taken after 59.5.
Therefore, all conversion 5 year holding periods all end upon reaching 59.5.
Permalink Submitted by Liz Griffiths on Fri, 2025-05-09 14:56
ROTH savings and conversion question
Please guide me. Here are details of my client’s situation:
43 year old client inherited and IRA from her dad in 2023 and an IRA from her mom in 2025. The toal of the two = $4,500,000. As a non-spouse beneficiary, she has to deplete the accounts within 10 years respectively.
The distributions are her only source of income.
From each distribution, we will withhold FED and State tax and save a portion. The balance will be transferred to her bank account for her to live on.
I think I’d like her to open a ROTH account into which we’d convert the savings portion. Based on our plan, she wouldn’t need to access any of the ROTH funds for at least 10 years, so we’d meet and exceed the 5 year open account rule and the funds would grow and be available to her tax free down the line.
Here are my questions:
Does this concept make sense/does it comply with all the IRA and ROTH rules and, if so, am I missing anything?
If this is a good idea, it seems that two separate transactions would need to take place, one which would include the withholdings (for the entire distribution including the “savings” conversion”) and the transfer to her bank account and the second, just the amount of “savings” that would be sent to the ROTH. Is this the right way to do this?
Thank you!