Why you should not care about the Roth IRA five-year rules
Monthly IRA Updates
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WHY YOU SHOULD NOT CARE ABOUT THE ROTH IRA FIVE-YEAR RULES

By Sarah Brenner, JD
IRA Analyst

Sarah Brenner

Roth IRAs first arrived over twenty years ago. A lot has changed since 1998. That was the year that Google was founded and an electronic pet called a Furby was one of the most popular Christmas gifts. However, some things haven’t changed so much. Impeachment is once again all over the news and here at the Slott Report we are still being asked many questions about how the five-year rules for Roth IRA distributions work. We probably get more questions on this topic than just about any other.

How the Rules Work
A good deal of the confusion about the Roth IRA distribution five-year rules stems from that fact that there are two separate rules that each work differently.

There is one for penalty-free distributions. It applies only if you are under 59½ years old and only to conversions. This five-year holding period will restart with every conversion you do.

The other five-year rule is used to determine if a Roth distribution of earnings is a qualified distribution and income tax-free. This five-year holding period starts when your first Roth IRA account is established. It does not restart for each Roth IRA contribution or conversion.

Why You Should NOT Care

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Mailbag

Q: I have received differing views on making a 401(k) conversion to a Roth IRA. I'm a 64 year old retired federal employee and plan to transfer all my funds from the TSP to my traditional IRA. From there I plan to make annual conversions to my long established Roth IRA. Is there an issue with the five-year rule that would prevent me from being able to make withdrawals from the Roth during the next few years? Thanks for your help.

Answer

Q: I am over 71 and have 2 IRAs, one in my name, the other is inherited. Can I take one RMD from the inherited IRA to satisfy both? Or must I treat them separately and do 2 separate RMDs?

Answer

Q: Is there any way to do a charitable distribution from my IRA before I reach RMD age? I am recently retired and 65 years old.

Answer

Have a question for our IRA Techincal Team?
Email your questions to us at mailbag@irahelp.com. Selected questions will be featured every Thursday in the Slott Report.

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