ROTH withdrawal rule clarification needed

[7BeachbUm0]

I first opened a ROTH IRA about 7 years ago. I am now 69 years old. Since opening the ROTH, I have added it by doing conversions from my traditional IRA for the past 4 years. Does the five year withdrawal rule apply to each of the conversions individually or is all the money in the ROTH available for tax free withdrawal since I'm over 59 1/2 and the account has been opened for 5 years?

[retiredjg]

All the money in the Roth IRA is available for you to withdraw whenever you want. This is because you are over 59.5 and the Roth IRA is over 5 tax years old.

Conversions don't matter after those two milestones have both been met age 59.5.

[Silk McCue]

You are in the clear for all funds in the Roth because as you say it has been opened for more than 5 years and you are over 59 1/2.

This is a snippet from a larger Roth withdrawal analysis table often shared here on Bogleheads.

OVER AGE 59.5
FIVE YEARS OR MORE SINCE OPENING FIRST ROTH IRA

All Distributions Are Qualified

Cheers

[Alan S.]

Note that the 5 year holding period for conversions ends at 59.5, no matter how long you have held your Roth. Therefore, your first conversion never did have a holding period even if that conversion 4 years ago was the first Roth contribution you ever made.

But you do need the 5 years from your first Roth contribution to be completed AS WELL AS being 59.5 for all gains in the Roth to be tax free.

[neilpilot]

But you do need the 5 years from your first Roth contribution to be completed AS WELL AS being 59.5 for all gains in the Roth to be tax free.

I have a similar situation as the OP, ie a Roth conversion account that’s 7 years old. I’m considering converting additional tIRA funds before year end.

You seem to say that the gains from this year’s conversion can be withdrawn tax free “5 years from your first Roth contribution“, but I’ve read elsewhere that each conversion starts their own 5 year clock. Which is correct? Also how complex is it to maintain separate 5 year clocks on conversion gains if all conversions are commingled in a single Roth account?

[Silk McCue]

But you do need the 5 years from your first Roth contribution to be completed AS WELL AS being 59.5 for all gains in the Roth to be tax free.

I have a similar situation as the OP, ie a Roth conversion account that’s 7 years old. I’m considering converting additional tIRA funds before year end.

You seem to say that the gains from this year’s conversion can be withdrawn tax free “5 years from your first Roth contribution“, but I’ve read elsewhere that each conversion starts their own 5 year clock. Which is correct? Also how complex is it to maintain separate 5 year clocks on conversion gains if all conversions are commingled in a single Roth account?

How old are you?

If you are over 59.5 and have had a Roth for 5 years then there are no more clocks on anything. You can withdraw any and all funds without issue.

OVER AGE 59.5
FIVE YEARS OR MORE SINCE OPENING FIRST ROTH IRA

All Distributions Are Qualified

Cheers

[neilpilot]

But you do need the 5 years from your first Roth contribution to be completed AS WELL AS being 59.5 for all gains in the Roth to be tax free.

I have a similar situation as the OP, ie a Roth conversion account that’s 7 years old. I’m considering converting additional tIRA funds before year end.

You seem to say that the gains from this year’s conversion can be withdrawn tax free “5 years from your first Roth contribution“, but I’ve read elsewhere that each conversion starts their own 5 year clock. Which is correct? Also how complex is it to maintain separate 5 year clocks on conversion gains if all conversions are commingled in a single Roth account?

How old are you?

If you are over 59.5 and have had a Roth for 5 years then there are no more clocks on anything. You can withdraw any and all funds without issue.

OVER AGE 59.5
FIVE YEARS OR MORE SINCE OPENING FIRST ROTH IRA

All Distributions Are Qualified

Cheers

I’m 68 and while it would be nice if your quote applied, I question it based on 2 points. Firstly I believe that the over 59.5 rule applies only to the Roth contribution, and not the gains in the account. The gains are still subject to the 5 year rule.

Also, while the first traditional Roth sets the 5 year clock for all other traditional Roth’s, each and every Roth conversion is subject to their own separate 5 year clock.

Based on my read of https://www.bankrate.com/investing/ira/ ... ent-times/.

[Silk McCue]

I’m 68 and while it would be nice if your quote applied, I question it based on 2 points. Firstly I believe that the over 59.5 rule applies only to the Roth contribution, and not the gains in the account. The gains are still subject to the 5 year rule.

Also, while the first traditional Roth sets the 5 year clock for all other traditional Roth’s, each and every Roth conversion is subject to their own separate 5 year clock.

The article that you reference is poorly written and NEVER discusses the impact of being over 59.5. It is worthless as a source.

Regretfully you are simply looking at the wrong sources of information. You can easily find this answer provided over and over again on this site.

The quote applies to you. "All Distributions" means All, not most but ...

If Alan S. has it wrong then we are all doomed.

Cheers

[retiredjg]

But you do need the 5 years from your first Roth contribution to be completed AS WELL AS being 59.5 for all gains in the Roth to be tax free.

I have a similar situation as the OP, ie a Roth conversion account that’s 7 years old. I’m considering converting additional tIRA funds before year end.

You seem to say that the gains from this year’s conversion can be withdrawn tax free “5 years from your first Roth contribution“, but I’ve read elsewhere that each conversion starts their own 5 year clock. Which is correct? Also how complex is it to maintain separate 5 year clocks on conversion gains if all conversions are commingled in a single Roth account?

How old are you?

If you are over 59.5 and have had a Roth for 5 years then there are no more clocks on anything. You can withdraw any and all funds without issue.

OVER AGE 59.5
FIVE YEARS OR MORE SINCE OPENING FIRST ROTH IRA

All Distributions Are Qualified

Cheers

I’m 68 and while it would be nice if your quote applied, I question it based on 2 points. Firstly I believe that the over 59.5 rule applies only to the Roth contribution, and not the gains in the account. The gains are still subject to the 5 year rule.

Also, while the first traditional Roth sets the 5 year clock for all other traditional Roth’s, each and every Roth conversion is subject to their own separate 5 year clock.

Based on my read of https://www.bankrate.com/investing/ira/ ... ent-times/.

Silk McCue is correct. If you are old enough and if your Roth IRA is old enough, all the money in the roth IRA is available without tax or penalty.

You are correct that the gains that occur inside the Roth IRA are subject to a 5 year rule as well as the 59.5 age rule. But that 5 year clock is tied to the Roth, not to conversions. Conversions have a different 5 year clock and they do not exist/matter at all if you are over 59.5.

I find the Bankrate article accurate but woefully incomplete. Way too much critical information, like age, is left out, allowing people to make incorrect conclusions.

[retiredjg]

See if this website makes it clearer for you.

https://fairmark.com/retirement/roth-ac ... -overview/

https://fairmark.com/retirement/roth-ac ... roth-iras/

You can also search around that website for more information.

[jimcrawford01]

I feel your pain re the 5 yr clock for CONVERSION. PUB 590 confused me as well, however, I am now a believer of the para re QUALIFIED Withdrawals.

I have 3 Roth accounts at Vanguard.

Roth 1 Opened with big CONVERSION in 2010. (Sure glad I did that! Great time to CONVERT).

Roth 2 Opened in 2011 with small CONVERSION $$.

Roth 3 Opened in 2012 with CONVERSION $$.

THENCE, added CONVERSION $$ each year (2013,14,15,16,and 17) to Roth 3. So, Roth 3 has $$ that is LESS than 5 yr in Roth 3. But Roth 1 is more than 5 yr old.

I am over 59 1/2.

Because of the poorly written PUB 590, I, too, thought that each CONVERSION $ had its own 5 yr clock. However, if I look in PUB 590 where it defines QUALIFIED Withdrawals/Distributions, I now believe (Thanks BHs) all $$ in my 3 Roths are QUALIFIED (and available) to me tax & penalty free (due to Roth 1 older than 5 yrs).

Took me a while to get this.