ROTH conversions, 5 year rule

[hunzoli]

If one has multiple ROTH IRA accounts, does IRS handle them as just having one account? In detail: I have an "old" over 5 years Roth Ira with substantial growth over the years. And now, I want to create more separate Roth Ira accounts to see easily my finances. I convert traditional IRAs to new ROTH accounts, which are long term investments. I am not going to touch them for over five years. I know the Ordering Rule of IRS, but it is not clear in this case. Will IRS handle the multiple Roth accounts one by one? If another account "matures" over 5 years old, will I be able to use it just like my "old" Roth account? In this sense, does it make sense to have multiple separate Roth accounts? Thanks in advance for clarification. And, can Turbotax handle this kind of Tax case? Regards, Zoltan

[Click]

Roth IRA accounts are all one Roth IRA account as far as the IRS is concerned. Similarly for IRA accounts (but not 401(k) accounts).

The 5-year clock you are referring to starts Jan 1 of the year you put your first dollar into ANY Roth IRA account, even if you closed that account decades ago. If that occurred for you at least five years ago, and you are older than 59 1/2, there are no five year rules for you to worry about any more.

[hunzoli]

Hi Click,

THanks for the quick reply. I understand that having a Roth IRA over five years, covers the five year requirement for all Roth IRAs, and being over 59 1/2 old, as far as the principal goes, meaning contribution and conversions. But, the other five years rulke is on earnings. The distribution from earning portion to be qualified, the account has to be over five years old. This is my understanding. Am I missing something here?  Due to IRS' ordering rule, I thought it is cleaner if I have separate Roth accounts for each conversion. Then, it is clear where money is withdrawn from, easier to document. Is it a valid approach, or unnecessary one?

[Click]

That seems to be a common misconception. Again, the IRS views all your Roth IRA accounts as if it were one account. It doesn't care about account boundaries. Same is true for IRA accounts .. they are all one. (however, not true for 401(k) accounts).

The OTHER 5-year rule on conversions and penalty for withdrawing principal does start a new clock for each conversion. However, the 5-year-rule on conversions does not apply to those over 59 1/2.

https://www.schwab.com/learn/story/what-to-know-about-five-year-rule-roths