When does the 5 years for a Roth start?
We have a client who has a 401k with both Roth and traditional money in it.
He is going to be rolling over the Roth part to a Roth IRA and traditional part to traditional IRA. If he is under 59.5 years old and does not have a Roth now, does the 5 years start with the Roth 401k date or the date of the rollover?
If he is over 59.5, is there an issue at all?
Permalink Submitted by Alan - IRA critic on Mon, 2024-04-22 20:03
It starts on 1/1 of the year the Roth IRA receives the rollover. It always starts on the first year in which any allowed Roth IRA contribution is made. If after 59.5 and the Roth 401k is qualified (5 years and 59.5), the entire amount rolled over is treated as a regular Roth IRA contribution and can be withdrawn without tax or penalty anytime. But earnings generated in the Roth IRA itself are not tax free until the Roth IRA has been held 5 years/age 59.5.