Roth Conversion | Ed Slott and Company, LLC

Roth Conversion

I have a client age 69 that is interested in discussing Roth conversion. Does the 5 year rule (10% penalty) apply since he is over 59.5?

No, it does not apply after 59.5.  He can withdraw the converted money anytime without tax or penalty. However, if this is his first Roth contribution he will have to wait 5 years before the Roth is qualified and earnings will be tax free.

Does each subsequent conversion also have a five year holding period?

No. As noted above, after 59.5 there is no 5 year holding period for the converted amount. The other 5 year holding period is for all Roth IRA accounts of a taxpayer becoming qualified and totally tax free.  This 5 year period starts 1/1 of the first year a Roth contribution is made, either a regular or conversion contribution.  Therefore, there is no additional holding period for subsequent conversions.


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