Roth IRA 5 Year Rule - Straight From The IRS

Описание: Lots and lots of questions about the 5 yr rule when it comes to Roth IRAs. So let's take some time to dive into this using the IRC (Internal Revenue Code) specifically.

Three things:

1. Under 59.5
2. Contributions
3. Conversions

1. if you are under 59.5 you will have tax and the 10% penalty on ANY gains you take out of your Roth.

BUT, you will have NO tax or penalty on taking distributions from your CONTRIBUTIONS.

However, you will have 10% penalty on taking distributions of your CONVERSION amount.

Over 59.5 - NO 10% penalty, no matter what.

2. Contributions - need to wait 5 yrs AND be 59.5 before you have complete access to your Roth EARNINGS. Contributions though are always yours tax free.

3. Conversions - Under 59.5 your conversion amount is subject to a 10% penalty but NOT tax.

Over 59.5 your conversion amount is free of tax and penalty. Your earnings are subject to tax though if the account hasn't been opened for 5 years.

PLUS each conversion has its OWN 5 year waiting period too!

Whew! Lots to ponder. Hope this helps!


https://www.law.cornell.edu/uscode/te...
https://www.law.cornell.edu/cfr/text/...
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