Thank you for the follow up questions:
Yes, there are two different distinct 5 year rules for a Roth IRA. The Earnings 5-Year Clock (The "Forever Rule"): The earliest funding event—whether it was a $5,000 contribution 10 years ago, or a $1 conversion 5 years ago—starts the clock for all your Roth IRAs. It is a one-time, lifetime clock for the owner.
While, the Conversion 5-Year Rule (The "Penalty-Free" Clock): It Starts: January 1 of the calendar year in which the conversion occurs. This clock is specific to each conversion. If you make 10 conversions over 10 years, you have 10 separate 5-year clocks. Met after five full tax years and a qualified event.
Earnings Distribution to Beneficiaries: Since your Roth IRA's 5-year clock for earnings is met as of 1/1/2025, your beneficiaries (subject to the 10-year withdrawal rule under the SECURE Act) would receive the entire balance—contributions, conversions, and Earnings—Tax-Free and Penalty-Free on any withdrawals starting 1/1/2025. No Age Requirement: The death of the original owner satisfies the "qualified reason" requirement for the distribution to be tax-free, regardless of your age at death.
Lastly, converted Principal Withdrawals: The converted amount is always tax-free when withdrawn because you paid the tax in the year of conversion (2020). In your scenario: Since the 5-year conversion period (2020 to 2024) is met, the $110 is penalty-free regardless of your current age. If you are also over 59 1/2, the penalty waiver is double-satisfied.
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