RMDs and Roth IRA 5-Year Rule: Today’s Slott Report Mailbag
By Andy Ives, CFP®, AIF®IRA AnalystFollow Us on Twitter: @theslottreport QUESTION: I turn 72 years old next month. Can I take part...
5-year rule
The 5-Year Rule and Multiple Beneficiaries: Today’s Slott Report Mailbag
Question:
Hi Ed,
I’m 66 Years old. Less than a year ago I converted into my Roth from my traditional IRA with the intention of parking it there until I could finalize the details of a summer house purchase. I know I have taxes to pay on the conversion. However, now that I wish to use the money and remove it from the Roth, am I going to be subject to a penalty due to a 5-year rule? I was of the understanding that only “earnings” (which for me meant any money earned ON the money I had deposited into the Roth) had to stay in the Roth for 5 years. Does the 5-year rule actually apply to ALL the money I put into the Roth via conversion from the traditional IRA? I have spoken to a few different advisors and have gotten conflicting responses, so I’ve decided to go to the IRA Guru for an accurate, reliable answer.
Thanks Ed!
When the Five-Year Rule Applies
If you inherit an IRA, especially if it is a larger one, you may be afraid of being stuck with the five-year distribution rule. If this rule applies, your IRA must be entirely emptied in five years, which can be a serious tax hit.
Under the tax rules, if you are named as the beneficiary on the IRA beneficiary designation form, you will not be subject to the five-year rule. Instead, you will most likely be looking at a 10-year payout under the SECURE Act. If you qualify as an eligible designated beneficiary, you can even still stretch payments from the inherited IRA over your life expectancy.
Watch Out for the Five-Year Rule on Converted Roth Funds
If you are under age 59 ½ and you converted your traditional IRA to a Roth IRA, you will need to watch out for the five-year rule for penalty-free distributions of converted funds. Not understanding how the rule works can result in unexpected penalties when you withdraw your Roth IRA funds.
Roth IRA Rollovers and the 5-Year Rule: Today’s Slott Report Mailbag
Question:
Hi!
I am over 60 and have had a self-directed Roth IRA for the past 15 years. I would like to roll some of it over to another self-directed Roth where I could invest in crypto-currency. Is this possible?
3 Roth IRA Myths You Can’t Afford to Believe
Roth IRAs are powerful retirement savings tools... if you used correctly. Here are 3 Roth IRA myths you simply can't afford to believe.
Does Each Roth IRA Need Its Own Five-Year Clock?
This week's Slott Report Mailbag answers whether each separate Roth IRA needs its own five-year clock and if you can convert non-deductible Traditional IRA funds to a Roth IRA. Do you know the answers?
When Does the Roth IRA 5-Year Clock Begin?
For anyone who did a Roth IRA conversion in 2010, you have now fulfilled the 5-year waiting period for taking penalty-free distributions from your 2010 Roth conversion. You have also passed one test for taking a qualified distribution. Here's what else you need to know about the Roth IRA 5-year clock.
President Obama’s 2015 Budget Includes A Possible Retirement Planning Game-Changer
Yesterday, President Obama unveiled his Fiscal Year 2015 Budget. As has been the case with previous budgets, this year’s version includes a number of proposed changes aimed at retirement accounts. Six out of the 7 provisions detailed below, or similar versions of them, were included in President Obama’s Fiscal Year 2014 Budget last year.
Slott Report Mailbag: How Do I Name a Properly Titled Inherited? IRA?
This week's Slott Report Mailbag looks at the once-per-year rollover rules, touches on how to name a properly titled inherited IRA and once again dissects the always-confusing Roth IRA 5-year rules. Click to read a Q&A with our IRA Technical Expert.
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