@raysurx2010 wrote:
So as long as the person is over 59 1/2, basically the 5 year rule no longer applies for any withdrawals made to ROTH IRA's with less than 5 years of creation?
The 5 year conversion clock doesn't apply but the overall 5 year rule still applies.
If you don't have a Roth IRA now (or your spouse does not have one now, remember there are no joint accounts and each owner must follow the rules individually), then any earnings that are withdrawn within 5 years from the opening of the first Roth IRA are taxable, no matter the age.
For example, your wife is 58 and does not currently own a Roth IRA. She opens a Roth IRA in 2025 by converting $10,000 and paying the income tax. Withdrawals are always in the order of contributions first, conversions second, and earnings last. Suppose that in 2028, when she is 60 and the account is less than 5 years old, she withdraws $5000. That will all come from conversions. There is no income tax (because that was already paid). There is no 10% penalty, because she is over age 59-1/2. Then suppose that in 2029, she withdraws $6000. This represents the remaining $10,000 of the conversion, plus $1000 of earnings. There is no income tax on the conversion and no penalty (for the same reasons) but the $1000 of earnings is subject to regular income tax because she had not passed the overall 5 year clock on IRAs. Then in 2030, she withdraws another $1000. This is all earnings (unless there were other contributions or conversions in the mean time). The withdrawal is completely tax free because both 5 year rules are satisfied.
The bank is wrong that money can't be withdrawn. You can always withdraw funds from an IRA, the question is whether or not, or how much of it, will be taxed and in what way.
