1. Yes.
2. Yes.
3. No. Each conversion has a separate 5 year clock.
4. Any movement from a pre-tax account (401k or traditional IRA) into a Roth IRA is a conversion and you pay income tax at the time of the conversion. The 5 year rule applies to the 10% penalty for early withdrawal.
It works like this:
When you withdraw from a Roth IRA, you withdraw contributions first, conversions second, and earnings last. There is a 5 year clock on opening the IRA and a separate 5 year clock on each conversion. Here is how you are taxed:
| If you withdraw contributions |
Never taxed |
| If you withdraw conversions less than 5 years after the conversion |
10% penalty for early withdrawal if under age 59-1/2, no tax if over age 59-1/2
|
| If you withdraw conversions more 5 years after the conversion |
Not taxed
|
| If you withdraw earnings before the 5 year period for opening the IRA |
Subject to income tax. Also subject to the 10% penalty for early withdrawal if you are under age 59-1/2
|
| If you withdraw earnings after the 5 year period from opening the IRA |
Subject to income tax and the 10% penalty if under age 59-1/2. No tax if over age 59-1/2.
|
There are also some exceptions to the 10% penalty for various circumstances as allowed by law.
