Roth IRA 5 year rule

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docdaneeka
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Roth IRA 5 year rule

Post by docdaneeka » Wed Jan 03, 2018 3:18 am

I have been slowly converting my traditional Rollover IRA from retirement to a Roth IRA. The first conversion to set up the Roth was on 30December2013. I've been making yearly conversions since then. The last one was a week ago. I'm now 68 and I retired in 2010.

When does my 5 year waiting period end? I've been reading that the clock starts ticking on the first day of the year of the first conversion. That would be 01January2013. Is my 5 years up? Can I now withdraw money from the Roth without penalty or taxation?

livesoft
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Re: Roth IRA 5 year rule

Post by livesoft » Wed Jan 03, 2018 3:22 am

I think it ended about 8 years ago.

See: https://www.kitces.com/blog/understandi ... nversions/
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docdaneeka
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Re: Roth IRA 5 year rule

Post by docdaneeka » Wed Jan 03, 2018 11:26 am

Given the information from the link you provided, your glib answer doesn't make any sense.

DrGoogle2017
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Re: Roth IRA 5 year rule

Post by DrGoogle2017 » Wed Jan 03, 2018 11:31 am

Think of it as one Roth account. The first day you open the Roth account is what counts. This is my understanding. I did lock up in a 5 year bond or CD for the initial amount for that very particular reason.

dlw322
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Re: Roth IRA 5 year rule

Post by dlw322 » Wed Jan 03, 2018 11:32 am

from the article

For others, the reality is that the Roth conversion 5-year rule is a moot point anyway, because they already meet another exception to the early withdrawal penalty (e.g., already being over age 59 1/2)

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iceport
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Re: Roth IRA 5 year rule

Post by iceport » Wed Jan 03, 2018 11:33 am

...deleted...
Last edited by iceport on Wed Jan 03, 2018 11:35 am, edited 1 time in total.
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mgullo
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Re: Roth IRA 5 year rule

Post by mgullo » Wed Jan 03, 2018 11:33 am

docdaneeka wrote:
Wed Jan 03, 2018 11:26 am
Given the information from the link you provided, your glib answer doesn't make any sense.
I think livesoft is referencing this part of the linked article:
For others, the reality is that the Roth conversion 5-year rule is a moot point anyway, because they already meet another exception to the early withdrawal penalty (e.g., already being over age 59 1/2).
I'm guessing that you have not been held accountable to the early withdrawal penalty for about 8 years.
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MarkNYC
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Re: Roth IRA 5 year rule

Post by MarkNYC » Wed Jan 03, 2018 11:45 am

mgullo wrote:
Wed Jan 03, 2018 11:33 am
docdaneeka wrote:
Wed Jan 03, 2018 11:26 am
Given the information from the link you provided, your glib answer doesn't make any sense.
I think livesoft is referencing this part of the linked article:
For others, the reality is that the Roth conversion 5-year rule is a moot point anyway, because they already meet another exception to the early withdrawal penalty (e.g., already being over age 59 1/2).
I'm guessing that you have not been held accountable to the early withdrawal penalty for about 8 years.
For the OP It is not a moot point, because the OP asked about the 5 year rule in regards to penalty AND TAXATION. To avoid taxation on any earnings withdrawn, he must satisfy the 5 year rule for qualified distributions, which he did on 1/1/18, assuming the 2013 conversion was his first Roth account.

docdaneeka
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Re: Roth IRA 5 year rule

Post by docdaneeka » Wed Jan 03, 2018 11:47 am

"Can I now withdraw money from the Roth without penalty or taxation?"

No penalty because I was 64 when I made the first conversion...got it everyone, thanks. But what about taxation on the earnings when I withdraw?

docdaneeka
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Re: Roth IRA 5 year rule

Post by docdaneeka » Wed Jan 03, 2018 12:09 pm

@MarkNYC:
Thank you. So my 30December 2013 conversion is indeed counted as 01January 2013? It doesn't have to been made before 15April? Any time in 2013 is good?

From the posted article, it sounds like I can only withdraw tax-free from that first conversion. Subsequent conversions each have their own 5-year rule. Is that true?

DrGoogle2017
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Re: Roth IRA 5 year rule

Post by DrGoogle2017 » Wed Jan 03, 2018 12:18 pm

docdaneeka wrote:
Wed Jan 03, 2018 12:09 pm
@MarkNYC:
Thank you. So my 30December 2013 conversion is indeed counted as 01January 2013? It doesn't have to been made before 15April? Any time in 2013 is good?

From the posted article, it sounds like I can only withdraw tax-free from that first conversion. Subsequent conversions each have their own 5-year rule. Is that true?
5-year rule is the first time your account was open. I don’t know why you move the date from Dec 30, 2013 to Jan 01 2013,it doesn’t make sense.

No tax on earnings for Roth if you meet the 5 year rule, that’s the whole point of Roth IRA.

kaneohe
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Re: Roth IRA 5 year rule

Post by kaneohe » Wed Jan 03, 2018 12:19 pm

docdaneeka wrote:
Wed Jan 03, 2018 12:09 pm
@MarkNYC:
Thank you. So my 30December 2013 conversion is indeed counted as 01January 2013? It doesn't have to been made before 15April? Any time in 2013 is good?

From the posted article, it sounds like I can only withdraw tax-free from that first conversion. Subsequent conversions each have their own 5-year rule. Is that true?
perhaps you can answer your own question from the wonderful table by kawill of the fairmark.com site here:
http://fairmark.com/forum/read.php?2,63970

The general question is tricky because it involves conversion dates, your own age, age of the oldest Roth, and the previous history of withdrawals, contributions, conversions. For a specific case, the number of variables is smaller.
Last edited by kaneohe on Wed Jan 03, 2018 12:22 pm, edited 1 time in total.

MarkNYC
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Re: Roth IRA 5 year rule

Post by MarkNYC » Wed Jan 03, 2018 12:20 pm

docdaneeka wrote:
Wed Jan 03, 2018 12:09 pm
@MarkNYC:
Thank you. So my 30December 2013 conversion is indeed counted as 01January 2013? It doesn't have to been made before 15April? Any time in 2013 is good?

From the posted article, it sounds like I can only withdraw tax-free from that first conversion. Subsequent conversions each have their own 5-year rule. Is that true?
All 2013 conversions are considered as made on Jan1 for the 5 year rule.

There are two types of 5 year rules: one to determine "qualified distributions" and one to determine penalties on nonqualified distributions from conversion amounts. Once you meet the 5 year rule for qualified distributions (or reach 59 1/2), the 5 year conversion rule becomes irrelevant.
Last edited by MarkNYC on Wed Jan 03, 2018 12:21 pm, edited 1 time in total.

Silk McCue
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Re: Roth IRA 5 year rule

Post by Silk McCue » Wed Jan 03, 2018 12:20 pm

docdaneeka wrote:
Wed Jan 03, 2018 12:09 pm
@MarkNYC:
Thank you. So my 30December 2013 conversion is indeed counted as 01January 2013? It doesn't have to been made before 15April? Any time in 2013 is good?

From the posted article, it sounds like I can only withdraw tax-free from that first conversion. Subsequent conversions each have their own 5-year rule. Is that true?
Question 1 answer:
The April 15th reference is made regarding making a Contribution, not a Conversion. You can make a Contribution up to April 15 2014 and still have it count as starting in 2013. The year associated with a Conversion is the calendar year in which it is made so "Any time in 2013 is good".

Question 2 answer:
From the article - "For others, the reality is that the Roth conversion 5-year rule is a moot point anyway, because they already meet another exception to the early withdrawal penalty (e.g., already being over age 59 1/2)"

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Re: Roth IRA 5 year rule

Post by Ace1 » Wed Jan 03, 2018 12:28 pm

Deleted

docdaneeka
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Re: Roth IRA 5 year rule

Post by docdaneeka » Wed Jan 03, 2018 12:43 pm

@kaneohe: Thanks for kawill's table frome fairmark.com

From the article again:
"Unlike the 5-year rule for contributions, in the case of conversions, each conversion amount has its own 5-year time period (Treasury Regulation 1.408A-6, Q&A-5(c)), and thus with multiple conversions there may be multiple different 5-year periods underway at once. When withdrawals occur from conversion amounts, they are deemed to be withdrawal on a first-in, first-out basis under IRC Section 408A(d)(4)(B)(ii)(II), which effectively means the oldest conversions (most likely to have finished their 5-year requirement) are withdrawn first, and the most recent conversions are withdrawn last."

Given that, will I be taxed on earnings from post-2013 conversions if I withdraw them in 2018?

DrGoogle2017
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Re: Roth IRA 5 year rule

Post by DrGoogle2017 » Wed Jan 03, 2018 1:01 pm

docdaneeka wrote:
Wed Jan 03, 2018 12:43 pm
@kaneohe: Thanks for kawill's table frome fairmark.com

From the article again:
"Unlike the 5-year rule for contributions, in the case of conversions, each conversion amount has its own 5-year time period (Treasury Regulation 1.408A-6, Q&A-5(c)), and thus with multiple conversions there may be multiple different 5-year periods underway at once. When withdrawals occur from conversion amounts, they are deemed to be withdrawal on a first-in, first-out basis under IRC Section 408A(d)(4)(B)(ii)(II), which effectively means the oldest conversions (most likely to have finished their 5-year requirement) are withdrawn first, and the most recent conversions are withdrawn last."

Given that, will I be taxed on earnings from post-2013 conversions if I withdraw them in 2018?
I don’t know if I agree with the above. The following link is directly from the IRS, read the 5 year rule FAQ, why not take it directly from the horse’s mouth, so to speak.

https://www.irs.gov/retirement-plans/re ... h-accounts

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Epsilon Delta
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Re: Roth IRA 5 year rule

Post by Epsilon Delta » Wed Jan 03, 2018 1:07 pm

docdaneeka wrote:
Wed Jan 03, 2018 12:43 pm
Given that, will I be taxed on earnings from post-2013 conversions if I withdraw them in 2018?
No. The first question to ask is "Is the withdrawal qualified?" Since you are over 59.5 and your first Roth was opened more than five years ago the answer is yes. Qualified withdrawals are tax and penalty free, without exception. The rest of the complexity applies only to non-qualified withdrawals and have no effect on you.

Silk McCue
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Re: Roth IRA 5 year rule

Post by Silk McCue » Wed Jan 03, 2018 1:19 pm

Epsilon Delta wrote:
Wed Jan 03, 2018 1:07 pm
docdaneeka wrote:
Wed Jan 03, 2018 12:43 pm
Given that, will I be taxed on earnings from post-2013 conversions if I withdraw them in 2018?
No. The first question to ask is "Is the withdrawal qualified?" Since you are over 59.5 and your first Roth was opened more than five years ago the answer is yes. Qualified withdrawals are tax and penalty free, without exception. The rest of the complexity applies only to non-qualified withdrawals and have no effect on you.
In support of this from the Kitces article Executive Summary:
Ultimately, being able to effectively navigate the various Roth 5-year rules creates several planning opportunities as well. For some, taking advantage of the Roth conversion 5-year rule is a way for those well under age 59 1/2 to tap their IRA funds “early” without an early withdrawal penalty. For others, the reality is that the Roth conversion 5-year rule is a moot point anyway, because they already meet another exception to the early withdrawal penalty (e.g., already being over age 59 1/2). However, in all cases, the 5-year rule for contributions must be met before any Roth earnings can actually be tapped tax-free; fortunately, though, because any first-time contribution or conversion can start the clock, clients who are concerned about the 5-year rule can make a contribution to a Roth (or to a traditional IRA and then convert it) to start the time window now, and ensure they’ll never need to worry about it in the future!

Ready3Retire
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Re: Roth IRA 5 year rule

Post by Ready3Retire » Wed Jan 03, 2018 1:22 pm

Good information! I always thought one had to meet both the 59 1/2 year old requirement AND the 5 year requirement for tax/penalty free withdrawls. I guess I can stop creating separate Roth accounts for each calendar year... I'm up to 13 separate accounts so far (6 for her and 7 for him) :oops:

MarkNYC
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Re: Roth IRA 5 year rule

Post by MarkNYC » Wed Jan 03, 2018 1:42 pm

Epsilon Delta wrote:
Wed Jan 03, 2018 1:07 pm
docdaneeka wrote:
Wed Jan 03, 2018 12:43 pm
Given that, will I be taxed on earnings from post-2013 conversions if I withdraw them in 2018?
No. The first question to ask is "Is the withdrawal qualified?" Since you are over 59.5 and your first Roth was opened more than five years ago the answer is yes. Qualified withdrawals are tax and penalty free, without exception. The rest of the complexity applies only to non-qualified withdrawals and have no effect on you.
This is a clear and concise answer to the OP's question.

However, for complete accuracy, I would have changed the wording a bit, since the OP's first Roth account was not opened more than 5 years ago. It was opened only 4 years and 4 days ago on 12/30/13, but due to the way the 5-year holding period is measured, the OP's 5-year holding period was met on 1/1/18.

docdaneeka
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Re: Roth IRA 5 year rule

Post by docdaneeka » Wed Jan 03, 2018 1:51 pm

@DrGoogle2017: Your link is for contributions to designated Roth accounts. Wrong horse, so to speak.

@Epsilon Delta, Silk McCue, & MarkNYC: Thanks for the answer I was looking for concerning taxation on earnings.

From another website: "For determining qualified distributions, there is only one five-year period. This never starts over."

So...any distributions from my Roth are tax-free (principal & earnings) as of 01January 2018. The distributions have been penalty-free since inception.

Thanks to all who participated in this thread!

kaneohe
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Re: Roth IRA 5 year rule

Post by kaneohe » Wed Jan 03, 2018 2:07 pm

docdaneeka wrote:
Wed Jan 03, 2018 12:43 pm
@kaneohe: Thanks for kawill's table frome fairmark.com

From the article again:
"Unlike the 5-year rule for contributions, in the case of conversions, each conversion amount has its own 5-year time period (Treasury Regulation 1.408A-6, Q&A-5(c)), and thus with multiple conversions there may be multiple different 5-year periods underway at once. When withdrawals occur from conversion amounts, they are deemed to be withdrawal on a first-in, first-out basis under IRC Section 408A(d)(4)(B)(ii)(II), which effectively means the oldest conversions (most likely to have finished their 5-year requirement) are withdrawn first, and the most recent conversions are withdrawn last."

Given that, will I be taxed on earnings from post-2013 conversions if I withdraw them in 2018?
Others have already answered your question but I am trying to decipher why you asked that question to begin with. You cite the 5 yr rule conversion from some article so I am guessing you are associating earnings with each specific conversion. If that is what you were thinking, that is not correct.
The ordering rules say contributions come out first, then conversions (oldest first with some ordering within each conversion), then finally earnings...all earnings..........so earnings are not associated with any particular conversion. That means that unless you withdraw everything at once, you are unlikely to get in trouble with withdrawals esp.if you withdraw over a period of yrs. By the time you get to earnings, it is likely that you will have aged the account enough to get out of trouble.

The table was supposed to be homework. Are you over 59.5? Yes, which eliminates half of the table. Is the oldest Roth 5 y.o? There probably could be some improvement on the wording here..........others have discussed the birthdate refers to Jan 1 of the when the Roth was established....so answer should be Yes which takes you to the last entry in the table........no tax/no penalty.

DrGoogle2017
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Re: Roth IRA 5 year rule

Post by DrGoogle2017 » Wed Jan 03, 2018 2:08 pm

docdaneeka wrote:
Wed Jan 03, 2018 1:51 pm
@DrGoogle2017: Your link is for contributions to designated Roth accounts. Wrong horse, so to speak.

@Epsilon Delta, Silk McCue, & MarkNYC: Thanks for the answer I was looking for concerning taxation on earnings.

From another website: "For determining qualified distributions, there is only one five-year period. This never starts over."

So...any distributions from my Roth are tax-free (principal & earnings) as of 01January 2018. The distributions have been penalty-free since inception.

Thanks to all who participated in this thread!
You didn’t read the correct one. It’s distribution from Roth account, read the 5 year rule. They shoot horses don’t they? Oops, wrong quote.

DrGoogle2017
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Re: Roth IRA 5 year rule

Post by DrGoogle2017 » Wed Jan 03, 2018 2:09 pm

MarkNYC wrote:
Wed Jan 03, 2018 1:42 pm
Epsilon Delta wrote:
Wed Jan 03, 2018 1:07 pm
docdaneeka wrote:
Wed Jan 03, 2018 12:43 pm
Given that, will I be taxed on earnings from post-2013 conversions if I withdraw them in 2018?
No. The first question to ask is "Is the withdrawal qualified?" Since you are over 59.5 and your first Roth was opened more than five years ago the answer is yes. Qualified withdrawals are tax and penalty free, without exception. The rest of the complexity applies only to non-qualified withdrawals and have no effect on you.
This is a clear and concise answer to the OP's question.

However, for complete accuracy, I would have changed the wording a bit, since the OP's first Roth account was not opened more than 5 years ago. It was opened only 4 years and 4 days ago on 12/30/13, but due to the way the 5-year holding period is measured, the OP's 5-year holding period was met on 1/1/18.
Can you give a link from the IRS to why your above statement is correct.

kaneohe
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Re: Roth IRA 5 year rule

Post by kaneohe » Wed Jan 03, 2018 2:26 pm

DrGoogle2017 wrote:
Wed Jan 03, 2018 2:09 pm
MarkNYC wrote:
Wed Jan 03, 2018 1:42 pm
Epsilon Delta wrote:
Wed Jan 03, 2018 1:07 pm
docdaneeka wrote:
Wed Jan 03, 2018 12:43 pm
Given that, will I be taxed on earnings from post-2013 conversions if I withdraw them in 2018?
No. The first question to ask is "Is the withdrawal qualified?" Since you are over 59.5 and your first Roth was opened more than five years ago the answer is yes. Qualified withdrawals are tax and penalty free, without exception. The rest of the complexity applies only to non-qualified withdrawals and have no effect on you.
This is a clear and concise answer to the OP's question.

However, for complete accuracy, I would have changed the wording a bit, since the OP's first Roth account was not opened more than 5 years ago. It was opened only 4 years and 4 days ago on 12/30/13, but due to the way the 5-year holding period is measured, the OP's 5-year holding period was met on 1/1/18.
Can you give a link from the IRS to why your above statement is correct.
Distributions of conversion and certain rollover contributions within 5-year period. If, within the 5-year period starting with the first day of your tax year in which you convert an amount from a traditional IRA or rollover an amount from a qualified retirement plan to a Roth IRA, you take a distribution from a Roth IRA, you may have to pay the 10% additional tax on early distributions.
https://www.irs.gov/publications/p590b# ... 1000231061 see section on Roth IRA early distributions

MarkNYC
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Re: Roth IRA 5 year rule

Post by MarkNYC » Wed Jan 03, 2018 2:27 pm

DrGoogle2017 wrote:
Wed Jan 03, 2018 2:09 pm
MarkNYC wrote:
Wed Jan 03, 2018 1:42 pm
Epsilon Delta wrote:
Wed Jan 03, 2018 1:07 pm
docdaneeka wrote:
Wed Jan 03, 2018 12:43 pm
Given that, will I be taxed on earnings from post-2013 conversions if I withdraw them in 2018?
No. The first question to ask is "Is the withdrawal qualified?" Since you are over 59.5 and your first Roth was opened more than five years ago the answer is yes. Qualified withdrawals are tax and penalty free, without exception. The rest of the complexity applies only to non-qualified withdrawals and have no effect on you.
This is a clear and concise answer to the OP's question.

However, for complete accuracy, I would have changed the wording a bit, since the OP's first Roth account was not opened more than 5 years ago. It was opened only 4 years and 4 days ago on 12/30/13, but due to the way the 5-year holding period is measured, the OP's 5-year holding period was met on 1/1/18.
Can you give a link from the IRS to why your above statement is correct.
The 5-year holding period is defined in Treasury Reg 1.408A-6 Q&A-2 (this is the real horse's mouth - not IRS publications)

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Epsilon Delta
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Re: Roth IRA 5 year rule

Post by Epsilon Delta » Wed Jan 03, 2018 2:36 pm

DrGoogle2017 wrote:
Wed Jan 03, 2018 2:09 pm
Can you give a link from the IRS to why your above statement is correct.
Pub 590b wrote: Are Distributions Taxable?

You do not include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth IRA(s)

...

Other early distributions.

Unless one of the exceptions listed below applies, you must pay the 10% additional tax on the taxable part of any distributions that are not qualified distributions.
The first says that qualified distributions are not part of gross income, so are not subject to income tax. The second says that qualified distributions are excluded from the 10% penalty.

Also see Figure 2-1. Is the Distribution from Your Roth IRA a Qualified Distribution?
Pub 590b wrote: The distribution from the Roth IRA is a qualified distribution. It is not subject to tax or penalty.
I will also add that a careful reading of most accounts of taxation of Roth distributions will also confirm what I say. If you know what you're looking for it's in there, but most writers manage to bury the lede, and a lot of readers judge the importance of what is being said by the number of words, and miss the single most important sentence.

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Re: Roth IRA 5 year rule

Post by Katietsu » Wed Jan 03, 2018 2:52 pm

For the OP, because he meets the 5 year rule and the age requirement all withdrawals are tax and penalty free.

Now, the issue with each conversion having a separate 5 year holding period only applies if you are under 59.5 years old and is meant to address early withdrawal penalties. I assume this was done to avoid someone from being able to convert a deductible traditional IRA contribution to a Roth then withdraw it immediately as a return of a Roth contribution with no early withdrawal penalty. A person over 59.5 could just withdraw the money directly from the traditional IRA and not be subject to an early withdrawal penalty.

jalbert
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Re: Roth IRA 5 year rule

Post by jalbert » Wed Jan 03, 2018 3:04 pm

docdaneeka wrote:
Wed Jan 03, 2018 12:43 pm
@kaneohe: Thanks for kawill's table frome fairmark.com

From the article again:
"Unlike the 5-year rule for contributions, in the case of conversions, each conversion amount has its own 5-year time period (Treasury Regulation 1.408A-6, Q&A-5(c)), and thus with multiple conversions there may be multiple different 5-year periods underway at once. When withdrawals occur from conversion amounts, they are deemed to be withdrawal on a first-in, first-out basis under IRC Section 408A(d)(4)(B)(ii)(II), which effectively means the oldest conversions (most likely to have finished their 5-year requirement) are withdrawn first, and the most recent conversions are withdrawn last."

Given that, will I be taxed on earnings from post-2013 conversions if I withdraw them in 2018?
I’m not a tax professional. My understanding is yes, each conversion has a 5-year clock, withdrawals of amounts in their 5-year window are taxable, and you may need to have saved 5498 forms to establish the tax basis for withdrawals if you have any conversions still in their 5-year window.
Risk is not a guarantor of return.

kaneohe
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Re: Roth IRA 5 year rule

Post by kaneohe » Wed Jan 03, 2018 3:29 pm

jalbert wrote:
Wed Jan 03, 2018 3:04 pm
docdaneeka wrote:
Wed Jan 03, 2018 12:43 pm
@kaneohe: Thanks for kawill's table frome fairmark.com

From the article again:
"Unlike the 5-year rule for contributions, in the case of conversions, each conversion amount has its own 5-year time period (Treasury Regulation 1.408A-6, Q&A-5(c)), and thus with multiple conversions there may be multiple different 5-year periods underway at once. When withdrawals occur from conversion amounts, they are deemed to be withdrawal on a first-in, first-out basis under IRC Section 408A(d)(4)(B)(ii)(II), which effectively means the oldest conversions (most likely to have finished their 5-year requirement) are withdrawn first, and the most recent conversions are withdrawn last."

Given that, will I be taxed on earnings from post-2013 conversions if I withdraw them in 2018?
I’m not a tax professional. My understanding is yes, each conversion has a 5-year clock, withdrawals of amounts in their 5-year window are taxable, and you may need to have saved 5498 forms to establish the tax basis for withdrawals if you have any conversions still in their 5-year window.
As noted by Katietsu above and kawill's table cited in a link above, once you reach 59.5 y.o. (which OP is), the decision is whether the oldest Roth is
5 y.o. or not........the age of any conversions becomes irrelevant. That is to say, a different 5 yr clock is involved.

Also withdrawals of conversions are not taxable at any time since they were already taxed at conversion (or at TIRA contribution before conversion) ...tho associated earnings may be. ......and there might be a penalty

The beauty of the kawill table is that it is essentially a flow chart. Answer a few questions......age first....and the answer is essentially determined.
No thinking required (or desired since that can be dangerous :happy ) And no thousands of fuzzy words to read or deciper.
Last edited by kaneohe on Wed Jan 03, 2018 6:50 pm, edited 1 time in total.

jalbert
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Re: Roth IRA 5 year rule

Post by jalbert » Wed Jan 03, 2018 6:13 pm

Ok, I now agree it should not be taxable. To see it clearly in an IRS publication, I think the flowchart in Figure 2.1 in Publication 590 is salient.
Risk is not a guarantor of return.

kaneohe
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Re: Roth IRA 5 year rule

Post by kaneohe » Wed Jan 03, 2018 7:15 pm

jalbert wrote:
Wed Jan 03, 2018 6:13 pm
Ok, I now agree it should not be taxable. To see it clearly in an IRS publication, I think the flowchart in Figure 2.1 in Publication 590 is salient.
That flowchart by itself has some significant limitations:
You make a Roth conversion in 2017. In 2018 , you withdraw the full amount but the earnings are small. The flowchart suggests this is a non-qualified distribution but the words on the chart suggest possible tax/penalty on the earnings which are small. The chart doesn't tell you about the penalty on the conversion amount which can be misleading and much larger.....in other words,the chart tells the truth, but not the whole truth......
https://www.irs.gov/pub/irs-pdf/p590b.pdf p.32

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Re: Roth IRA 5 year rule

Post by LadyGeek » Thu Aug 30, 2018 8:00 pm

New member goofy669 has a question which I've moved into a stand-alone thread. See: Roth IRA 5 year rule - consolidating multiple accounts
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Peter Foley
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Re: Roth IRA 5 year rule

Post by Peter Foley » Thu Aug 30, 2018 8:09 pm

Here is the table version of the Roth Conversion chart that many here reference:

Re: Roth IRA Rules - Table Approach
Posted by: KAWill (IP Logged)
Date: October 14, 2010 11:57PM


Roth IRA Distribution Table

UNDER AGE 59.5
FIVE YEAR CONVERSION HOLDING PERIOD NOT MET

Contributions: Tax-No; Penalty-No
Conversions: Tax-No; Penalty-Yes (Taxable Portion)
Conversions: Tax-No ;Penalty-No (Nontaxable Portion)
Earnings: Tax-Yes; Penalty-Yes

UNDER AGE 59.5
FIVE YEAR CONVERSION HOLDING PERIOD MET

Contributions: Tax-No; Penalty-No
Conversions: Tax-No; Penalty-No (Taxable Portion)
Conversions: Tax-No; Penalty-No (Nontaxable Portion)
Earnings: Tax-Yes; Penalty-Yes

OVER AGE 59.5
LESS THAN FIVE YEARS SINCE OPENING FIRST ROTH IRA

Contributions: Tax-No ;Penalty-No
Conversions: Tax-No; Penalty-No (Taxable Portion)
Conversions: Tax-No; Penalty-No (Nontaxable Portion)
Earnings: Tax-Yes; Penalty-No

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

All Distributions Are Qualified

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