Roth 5 year rule | Ed Slott and Company, LLC

Roth 5 year rule

I wanted to get clarification on how the Roth 5 year rule works. I have a Roth Account that has been in existence for longer than 5 years and I am also 60 years old. Two years ago, when I was 58, I established two new Roth accounts and funded these two Roth accounts with a small portion of the original Roth account. The transfer was done internally at the same institution were the original Roth resides. Since these two new accounts are less than 5 years old, but were funded from a Roth account that was over 5 years old do these two newer account have there own 5 year clock? I have added no new money to any of these accounts...merely divided the 1 older account into three accounts (the original and two smaller new accounts).

Thanks in advance.

S

  • You are all set, and all your Roth IRAs are fully qualified. The 5 year holding period starts on 1/1 of the year you make your first Roth contribution (regular or conversion) and any transfers, rollovers, or even closing all your Roth accounts does not change that. The only potential issue would be if your first Roth contribution was an excess contribution, since an excess contribution does not start the holding period.
  • Accordingly, and distribution you take from here on is qualified and tax free. You do not have to file Form 8606 to report it, just show the gross distribution on line 4a of Form 1040. 
 

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