Knowledge Check on Roth Conversions

[orbops]

No, not if over 59.5...

Correct. Here is a post that provides a table:

Roth Conversion - Taxation on Earning & 5 Year Rule @age 60

If a person is 60 years of age, and has made a Roth conversion at age 60, can all of the funds be withdrawn in two years without paying any tax? I was wondering how does the five-year conversion rule for Roth conversions come in to play.

www.early-retirement.org

 

[Healthy Lifestyle]

The original $100k and any returns on it can be withdraw with no penalty. The $25k from 2024 can also be withdrawn without penalty. Any gains from the $25k will be penalized if withdrawn. The gains from the conversion must stay in the Roth for 5 years.

I believe this is correct following the Roth tax rules.

 

[pb4uski]

I am still confused on how the 5 year waiting period rule works on TIRA to Roth conversions. Here is a specific example with a specific question.
1.I am 77 years old.
2. I have an existing Roth with a $100,000 balance that I have not contributed to in over 5 years.
3.In 2024, I did a TIRA conversion to my existing Roth for $25,000. Roth balance is now $125,000.
4.In 2025 I will cash out the entire $125,000 Roth balance. My Roth IRA balance will then be $0.

My question is "Will I be subject to any penalties/tax in 2025 on my $125,000 Roth Withdrawal?

No, because you are over 59-1/2 and your Roth account is over 5 years old, all of your Roth withdrawals are tax free and penalty-free.

You could withdraw your entire balance and it would be tax-free and penalty-free, however you want to leave it in there to the extent that you can so that it will continue to be tax-free.

 

[orbops]

I believe this is correct following the Roth tax rules.

No, that is not correct since the poster mentioned it's been over 5 years since he had contributed.

 

[GATime]

No, not if over 59.5...

Sorry but the 5 year rule applies to any age and applies to each conversion not the account as a whole.

Source: Investopedia

Can You Take Money Out of a Roth IRA Before Five Years Elapse?​

The Roth IRA five-year rule says you can't withdraw earnings tax-free until it’s been at least five years since you first contributed to a Roth IRA account. This rule applies to everyone who contributes to a Roth IRA, whether they’re 59½ or 105 years old.7

Does the Five-Year Rule Apply to Roth Conversions After Age 59½?​

Yes. Even if you’re over age 59½ when you withdraw, some of your withdrawals could get included in taxable income, thanks to the five-year rule. You won’t owe the 10% penalty in that case, but you’ll still owe tax on any withdrawals above the amount contributed.

 

[pb4uski]

No. There are two 5-year rules, hence the confusion. One 5-year rule is on the age of the account and the other is on the age of each conversion.

In this case, the 5-year rule for the account is satisfied since the account is 20 years old. The 5-year rule for conversion doesn't apply since the owner is over 59-1/2.

From the table in post #16:

OVER AGE 59.5
FIVE YEARS OR MORE SINCE OPENING FIRST ROTH IRA

All Distributions Are Qualified
No Taxes
No Penalties

 

[orbops]

Here is the logic flowchart from the IRS:

 

[Gumby]

This page may be helpful in understanding the different five year rules.

What Is the Roth IRA 5-Year Rule? Withdrawals, Conversions, and Beneficiaries

The Roth IRA five-year rule applies in three situations and dictates whether withdrawals get dinged with penalties.

www.investopedia.com