Backdoor Roth and Roth conversions - no current Roth or IRA

[monte1022]

Does the 5 year period go away at 59.5yo for someone who has never had a Roth? My understanding is that IF you have never had a Roth then you must wait the 5 full years after opening your first Roth even if you are over 59.5yo. Prior to the 5yr mark and over 59.5yo lets you withdraw your contributions tax and penalty free but not the earnings. A first Roth starts the clock and once 5yrs pass then no other 5yr rules apply after 59.5. Kitces has a good article on this subject.

[Gumby]

Quote:

Originally Posted by monte1022 Does the 5 year period go away at 59.5yo for someone who has never had a Roth? My understanding is that IF you have never had a Roth then you must wait the 5 full years after opening your first Roth even if you are over 59.5yo. Prior to the 5yr mark and over 59.5yo lets you withdraw your contributions tax and penalty free but not the earnings. A first Roth starts the clock and once 5yrs pass then no other 5yr rules apply after 59.5. Kitces has a good article on this subject.

The 10% early withdrawal penalty goes away if you are over 59.5. The taxation of earnings withdrawn prior to 5 years does not go away. As with many things, it doesn't affect me, so I don't have personal knowledge, but that's the way I read the regulations.

[cathy63]

Quote:

Originally Posted by monte1022 Does the 5 year period go away at 59.5yo for someone who has never had a Roth? My understanding is that IF you have never had a Roth then you must wait the 5 full years after opening your first Roth even if you are over 59.5yo. Prior to the 5yr mark and over 59.5yo lets you withdraw your contributions tax and penalty free but not the earnings. A first Roth starts the clock and once 5yrs pass then no other 5yr rules apply after 59.5. Kitces has a good article on this subject.

Yes, you are correct.

Per IRS Pub 590-B:

A distribution is qualified if both of the following are true:
- It is made after the 5-year period beginning with the first tax year for which a contribution was made to a Roth IRA set up for your benefit.
- The payment or distribution is made on or after the date you reach age 59 1/2

[Dash man]

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Originally Posted by G-Man Overthinking comes from being in IT for over 30 years. Sorry for all the questions.

Questions are good. Never apologize for them!

[meleana]

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Originally Posted by TheWizard Once you're over age 59-1/2, those five-year periods go away...

No not true. Our FA said with each conversion we will have a 5 year waiting period before we can withdraw principle. We are in our 60's.

[Dash man]

Quote:

Originally Posted by meleana No not true. Our FA said with each conversion we will have a 5 year waiting period before we can withdraw principle. We are in our 60's.

Either you misunderstood your FA or he is wrong. You can withdraw principle because you’ve already paid tax on that in the conversions and are over 59 1/2. What you will have to pay tax on is if you withdraw the earnings on those conversions that haven’t had tax paid on them yet. After five years the earnings are tax free.

[SevenUp]

Quote:

Originally Posted by meleana No not true. Our FA said with each conversion we will have a 5 year waiting period before we can withdraw principle. We are in our 60's.

Perhaps it's time to get a new FA (or just Do It Yourself), because the FA is wrong.

If you don't believe the colored chart posted previously in this thread, see p. 31 of https://www.irs.gov/pub/irs-pdf/p590b.pdf regarding the non-taxation of "qualified distributions".

[meleana]

Quote:

Originally Posted by SevenUp Perhaps it's time to get a new FA (or just Do It Yourself), because the FA is wrong. If you don't believe the colored chart posted previously in this thread, see p. 31 of https://www.irs.gov/pub/irs-pdf/p590b.pdf regarding the non-taxation of "qualified distributions".

Well I'm thinking I probably misunderstood him.

[SevenUp]

Quote:

Originally Posted by meleana Well I'm thinking I probably misunderstood him.

Or you don't look your age and he assumed you were under 59.5.