I'm 56 and plan to use the Rule of 55 to access my 401K money after I retire Nov. 2. In the 401K I opened a Roth account in 2019. Outside of the 401K I have had a Roth account since 1998. Just wondering, does the 5 year rule apply to my 401K Roth, or does my 1998 Roth cover that.
This article would seem to indicate the latter:
https://www.kitces.com/blog/underst...s-for-roth-ira-contributions-and-conversions/
"And because the Roth rules aggregate all accounts together for the purposes of determining the tax treatment of various distributions, it’s necessary to track the various 5-year rules and the amounts they’re associated with, regardless of whether they are held separately or mingled together into a single account."
ALSO, while I'm at it, if I do a conversion into my 401K Roth now, will the conversion principal be available to me penalty free immediately or will I have to wait 5 years to touch even the principal, or perhaps wait until I'm 59 1/2 to touch the principal? I do realize each conversion has its own 5 year clock that applies to both principal and earnings, but does the rule of 55 nullify at least the principal part of that rule?
After some additional thinking, I guess I could just withdraw money straight up from my 401K IRA, pay the income tax and then put the withdrawn money in my old Roth and there would be no question that the principal would be available immediately, but that would be limited to $7000/year. My ultimate goal is to max out Roth's this year so I can minimize AGI in subsequent years to qualify for ACA subsidies.
I have done some reading on this but can't seem to find an answer that I'm fully confident in on either question.
This article would seem to indicate the latter:
https://www.kitces.com/blog/underst...s-for-roth-ira-contributions-and-conversions/
"And because the Roth rules aggregate all accounts together for the purposes of determining the tax treatment of various distributions, it’s necessary to track the various 5-year rules and the amounts they’re associated with, regardless of whether they are held separately or mingled together into a single account."
ALSO, while I'm at it, if I do a conversion into my 401K Roth now, will the conversion principal be available to me penalty free immediately or will I have to wait 5 years to touch even the principal, or perhaps wait until I'm 59 1/2 to touch the principal? I do realize each conversion has its own 5 year clock that applies to both principal and earnings, but does the rule of 55 nullify at least the principal part of that rule?
After some additional thinking, I guess I could just withdraw money straight up from my 401K IRA, pay the income tax and then put the withdrawn money in my old Roth and there would be no question that the principal would be available immediately, but that would be limited to $7000/year. My ultimate goal is to max out Roth's this year so I can minimize AGI in subsequent years to qualify for ACA subsidies.
I have done some reading on this but can't seem to find an answer that I'm fully confident in on either question.
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