5 Year Wait to Withdraw from Roth – #2

It is my understanding that one cannot withdraw money from a Roth IRA tax free until that money has been in for 5 years. If withdrawn earlier, any appreciation will be taxed – as from a traditional IRA. Suppose the owner of a Roth passes away 2 years after funding, and the beneficiary is less than 59.5yr. Must the new owner wait an additional 5yrs before being able to make a tax free withdrawal, or are the previous 2yrs “credited”?



The previous two years count, so the holding period is the total between the owner’s holding time and that of the beneficiary. A spousal beneficiary can assume ownership and gets the longer of their own or decedent’s holding periods.

A non spouse beneficiary must take RMDs starting in the year after owner’s death. For these RMDs or other additional distributions, the ordering rules I mentioned in your other post will apply, ie the contributions can be distributed tax free. Once they are gone and earnings are distributed, the earnings are taxable until the 5 years of total holding periods has been met.



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