Roth IRA Conversion Rules over 59 1/2

  1. A client has had their  Roth IRA open for 6 years. If a client is over 59 1/2 and they convert an IRA to a Roth IRA , can they access the conversion amount and earnings without a penalty and tax free, or do you still have to wait five years?
  2. Does the answer change if the IRA has only been open for 4 years when the conversion is completed and the client is still over 59 1/2?

 

 



2. is supposed to say Roth IRA**

Q 1 – the Roth is qualified and the entire balance can be withdrawn tax and penalty free.

Q2 – In this case, until the Roth has been held 5 years, the distribution of earnings would be taxable and would come out last, but there is no 10% penalty because owner is over 59.5. All conversion 5 year holding periods end at 59.5.

If the client is 61 and sets up a brand new Roth IRA and converts their IRA, can they access the conversion amount and earnings without a penalty and tax free, or do you still have to wait five years?

They can withdraw the converted amount tax and penalty free any time, but the earnings will be taxable (no penalty) until 5 years has passed. Earnings come out last.

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