Roth conversions over age 60

Submitted by Don Warnke on Thu, 2020-10-15 17:48

65 year old is looking to start converting some of their TIRA to RIRA annually. On conversions does the 5 yrs rule for qualified distributions apply to each conversion separately?



Submitted by Alan - IRA critic on Thu, 2020-10-15 18:33

After 59.5, there is no 5 year holding period for conversions with respect to the 10% penalty. The holding period for the Roth to be qualified and fully tax free starts with the year of the first contribution of any kind, so would not apply to conversions unless the first contribution of any kind happened to be a conversion.  



Submitted by Don Warnke on Thu, 2020-10-15 19:21

So if he starts a Roth in 2020 and converts $20k and then in 2021 converts another $20k and in 2022 his account has grown to $44k,  he can liquidate the entire account and will NOT have to pay tax on the $4k of gain?



Submitted by David Mertz on Thu, 2020-10-15 21:27

  • If 2020 is the first year that the individual contributed (either as a regular contribution or a conversion contribution) to a Roth IRA, any investment gains earned within the individual’s Roth IRAs will be taxable if distributed prior to 2025, but will not be subject to any early-distribution penalty since the individual is over age 59½.
  • The 5-year rule for determining if a distribution from a Roth IRA is a qualified distribution is a completely different rule from the 5-year rule that applies to Roth conversions.  Don’t confuse the two just because they both involve a 5-year period.


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