Roth conversion 5 year rule(s)
I’m considering coverting tradional IRA funds to a Roth IRA incrementally over the next 5 years. I’ve read on the subject but still unable to say I am clear on the “5 year rules”. I’m 66 now. If I open a Roth account before April 15, (deposit to open account – not converted from tradional IRA) this year, for 2022 tax year, one of the 5 year clocks starts Jan 1, 2022. I understand that this rule applies to the withdrawl of earnings in the accout – no penalty free EARNINGS withdrawal for5 years.
Correct?
Then, if I convert a part of my traditional IRA to this new Roth in 2023, a new 5 year clock starts (Jan 1, 2023). When can I withdraw the coverted CONTRIBUTIONS (tax and penalty free) from this conversion made in 2023? It seems that there is a 5 year rule on earnings withdrawls, but does a 5 year rule apply to withdrawal ofthese converted CONTRIBUTIONS as well? Thanks
Terry Says
Here is a link to the complicated rules for withdrawing from a Roth — and you’re right, it’s different depending on the source of the money!
https://www.investopedia.com/ask/answers/05/waitingperiodroth.asp