Yet another question regarding Roth accounts and the widely misunderstood 5 year rule.
Hi Ed et al.,
I’m 63 and have an 8 year old Roth invested in mutual funds with subsidiary of a major life insurance company. I would like to convert some of the amount from mutual funds to a soon to be established Roth account at one of the large online brokers (Schwab). Will those funds in the newly established second Roth account be subject to a new 5 year waiting period for any gains to be tax free?
Secondly, I would like to convert the funds in my 401k plan into the new Roth account over a period of 6 to 7 years. So will each or any of those yearly converted funds be subject to the 5 year wait for any gains to be tax free?
Thank you taking the time to answer my question!
Permalink Submitted by Alan - IRA critic on Thu, 2019-12-19 23:53
Because your Roth IRA is now qualified (age 59.5 and over 5 years held), all rollovers done into an existing or new Roth IRA account are also immediately qualified. There is no 5 year holding period of any kind you will still have to meet. Any distributions you need to take from your Roth IRA are non taxable and can be reported on line 4a on Form 1040 only. You no longer need Form 8606 to report Roth distributions, but you will need it to report new Roth conversions.