Hey there, first thank you for responding even if with just a suggestion 🙂
Actually, that is not correct. The basis of a Roth conversion (the amount you converted from a traditional IRA or other similar pretax account) can literally be withdrawn fed tax free a minute after you make the conversion. Because the Roth conversion from a traditional IRA is immediately a FIT taxable event. so the basis has already been taxed, you can pull it out later at any time with no fed tax.
The five-year rule that you mentioned is related to growth in the Roth account. The conversion is considered taxable income, but any later distribution of the basis amount is not taxable income.
this is probably one of the most widely misunderstood considerations of Roth basis. Five-year rule only applies to growth, and by the way there is a separate five year clock for each year conversions are made, that’s why I maintain separate Roth accounts that contain conversions made in different years, which have their own five year clock.
ps there are other complications if you are younger than 59.5, but that is not the case in my situation.
but again I do appreciate that you took the time to respond and make a suggestion.
Cheers!
