Roth Conversion 5 Year Rule (401k to Roth IRA)

Submitted by Giri Lakshmi on Wed, 2024-06-05 23:10

Hi:

 

I am currently 64 and from next year I am planning to start converting a fixed amount from my 401(k) every year to Roth IRA till I reach RMD age.

I already have a Roth IRA which was opened about 15 years ago and funded. The key question is for each of my future annual conversion, does the 5 year rule apply?

My understanding is that since I am above 59 1/2 years and have had Roth IRA for more than 5 years, any Roth conversions I do (going forward) will not be subject to a new “5-year rule”, meaning that I could do a conversion today (pay taxes on it) and withdraw from the converted Roth IRA at any time without paying additional tax or penalties. Hence, want to confirm the same.

Regards,



Submitted by Alan - IRA critic on Wed, 2024-06-05 23:22

Confirming that your Roth IRA is fully qualified and there are no longer any holding periods. The entire balance can be withdrawn tax and penalty free, and because your Roth is qualified, you do not need to report the distribution on Form 8606. You simply report the amount you received on line 4a of Form 1040.

Since your Roth had been held 5 years by the time you hit 59.5, any distributions after that date would have been qualified as outlined above.

Submitted by Giri Lakshmi on Wed, 2024-06-05 23:49

Hi Alan:

I am above 59 1/2 (actually 64) and my Roth IRA was opened in 2009 and funded (15 years ago) does it means it is qualified?

If so, does 5 year rule doesn’t apply for my future 401k conversion to Roth IRA?

I am planning to do the conversion from 401k to Roth IRA over several years till I reach RMD age.

 

Submitted by Alan - IRA critic on Thu, 2024-06-06 00:11

Yes, it is qualified. 401k rollovers done in the future have no holding periods and would be available to distribute from your Roth IRA anytime without tax or penalty. Of course, you will owe tax on the rollover to your Roth IRA, so you should control the amount of those rollovers.

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