Retirement tax questions

Hi @stone8pin,

I need to clarify. There is a difference between contributions and conversions/rollovers. If you only make contributions (i.e. deposits of your own funds into a Roth IRA), there is only one 5-year rule that applies to your Roth IRA. Specifically, the 5-year period starts from January 1st of the year in which you made the first contribution. There is no 5-year rule for any subsequent contributions. Therefore, if you make a $5,000 contribution to your Roth IRA in 2023, the 5-year period starts on January 1, 2023 and ends on January 1, 2028. If you make additional contributions (e.g. $5,000 in 2024, 2025, 2026, etc.) there will not be new 5-year periods that apply to those contributions. Accordingly, if you are at least 59 1/2 in 2028, you will be able to withdraw any amount from the Roth IRA without being subject to tax or a 10% penalty. For example, in the situation that you are describing, if you withdraw $10,000 in 2028, none of that distribution will be subject to tax.

There is a separate 5-year rule for conversions (e.g. rolling over a pre-tax 401k into a Roth IRA). Every time you convert a pre-tax account into a Roth IRA, a 5-year period is attached to each conversion.