Conversation from rollover IRA to Roth IRA.

Question

I am 66 years old and plan to make a partial conversion from my rollover IRA to my Roth IRA and pay the required tax on the conversion. I have owned the Roth IRA for 15 years. Can I withdraw converted money from the Roth IRA without any penalty or additional tax liability in the same year as the rollover since I’m over 65 and owned the Roth more than 5 years?

CoryF · Answer

Thank you for this follow up question.

The Publication 590-B is the utmost authority on distributions from all retirement accounts. The chapter on ROTH IRA has a section labeled qualified distributions from which my answer is based. At all times, distributions of the original contributions and taxable/nontaxable conversions to Roth are not subject to the 5-year rule and will not be added to your taxable income. However, there is no precedent for age (65) for the exception to the 5-year rule for the Earnings on the original contributions or conversions. If your distribution includes Roth earnings before the 5-year rule is met, then that portion of your distribution could be taxable. Each contribution or conversion starts a new 5-year period for the earnings.

There are ordering rules and a process to identify earnings on top of original contributions when a Roth distribution is made. Please see the publication and ask questions from your Financial Institution before any distribution is made where this 5-year rule could affect your future distributions.

It sounds like your Roth IRA may have several years of contributions and conversions for which distributions may not even dip into the earnings from recent past earnings that have not met their 5-year time frame. Your Financial Institution will have the right information for you to make a decision before any distribution is made.

risr#yk · Answer

Thanks for the response. I asked the question because I’ve had the Roth the money is going to for over 15 years. I have heard the 5 year rule on conversions no longer applies after 65 but can’t find credible support for it.

PhillipB · Answer

Hi,

Unfortunately, the 5 year rule applies regardless of age. The difference is that people under 59.5 have the 10% penalty while those over 59.5 may simply have to pay tax on earnings in the account since the conversion.

If the Roth conversion money will need to be withdrawn, it may be simpler to take the money out of the rollover IRA without the conversion.

Let us know if there are additional questions or concerns.

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