Taxable portion of Roth distribution?

anonymouse1

I've converted all of my traditional IRA to Roth over the course of 2022-2024 (had done a Roth conversion in 1999 as well). I separated them by year to a new Roth opened that year, because I know there's a 5-yr countdown on each conversion (with each conversion counted as being done on January 1 of that year regardless of the actual date). My brokerage told me I didn't need to separate them out like that. So in 2024 I did a direct rollover from my TSP to a traditional IRA with my broker, and converted most of it before December 31 2024. I converted the rest in January 2025 and put it in the same "Rollover Roth" account I opened in 2024 (separate from my original contributory Roth and contributory Traditional rolled over to "2024 Converted Roth"). But since they told me I didn't need to separate Roth accounts by conversion year, I rolled over more funds from my TSP in 2025 and converted all of those to the same "Rollover Roth" account before the end of the year. Now they tell me that when I go to take a distribution from *any* Roth (even the one I've had since 1999) I will have to fill out form 8606 to see how much is taxable.

The instructions for 8606 say "

Part III—Distributions From Roth IRAs

Complete Part III to figure the taxable part, if any, of your 2025 Roth IRA distributions.

Line 19

Don’t include on line 19 any of the following.

Distributions that you rolled over, including distributions made in 2025 and rolled over after December 31, 2025 (outstanding rollovers).
Recharacterizations.
Distributions that are a return of contributions under Return of IRA Contributions, earlier.
Distributions made on or after age 59½ if you made a contribution (including a conversion or a rollover from a qualified retirement plan) for any year from 1998 through 2020.
A one-time distribution to fund an HSA. For details, see Pub. 969.
Qualified charitable distributions (QCDs). For details, see Are Distributions Taxable? in chapter 1 of Pub. 590-B.
Distributions made upon death or due to disability if a contribution was made (including a conversion or a rollover from a qualified retirement plan) for any year from 1998 through 2020.
Qualified distributions from Part IV of your 2025 Form(s) 8915-F, if any, you repaid in 2025 no later than the deadline for repayment.
Distributions that are incident to divorce. The transfer of part or all of your Roth IRA to your spouse under a divorce or separation agreement isn’t taxable to you or your spouse."

So I take it that since I opened a Roth in 1999, (and I should add I'm over 59 1/2), even if I take a distribution from my Rollover Roth that I converted to in 2024-2025 before 2029, none of it is taxable and line 19 would be zero? What if I made a backdoor Roth contribution/conversion in 2028, and then took from that (separate account) in 2029? I'm getting different answers from Schwab and TSP (because I was considering doing an in-plan Roth conversion in TSP this year to start that separate 5-yr clock rolling, but they told me that if I converted $100,000 in 2026 and $100,000 in 2027 and in 2031 tried to pull $120,000 that $20,000 of that would be taxable).

Can anyone please explain to me the 5-yr rule on conversions, are conversions taxable AGAIN (since you paid taxes the year of conversion) if you pull them out before 5 years, or is it only the earnings that are taxable? If you have an account (like the TSP or my Rollover Roth) that has mixed conversions from different years in it, do the conversions come out first when making a distribution, so anything converted less than 5 years ago is taxable (AGAIN!), or does the custodian track the converted amount for each year AND its earnings (like TSP told me they would - Schwab doesn't), and the order of withdrawal is 1. Oldest converted amount (already taxed) 2. Earnings on oldest conversion (not taxed if conversion was made 5+ years earlier), 3. Next oldest converted amount (already taxed) or if 2 and 3 are switched? Or do you just fill out form 8606 like Schwab said and as long as the account (Roth IRA or Roth TSP/Roth 401K) was opened with either a contribution or conversion over 5 years earlier, then line 19 on the 8606 is zero?

My husband just started a Roth 401K and plans on retiring in 2029, so we're looking at possibly drawing on my oldest Roth in 2029, and may draw on my converted Roths opened in 2022 and 2023. We could potentially draw on our Roths converted in 2024 (he mixed all his contributions and conversions into one account) in 2030 - we thought this would be fine since they'd be over 5 years old. I'm looking at doing an in-plan conversion with the TSP every year for the next 10-12 years before I hit RMD age, and after he retires he'll convert some of his traditional 401K as well to minimize RMDs, but we will need to take some money out of Roths from 2031-2037 to live on while keeping in a lower tax bracket, and since we're still going to be doing Roth conversions during that period, some of our accounts are going to be less than 5 years old.