Roth conversion after 60

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space needle
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Roth conversion after 60

Post by space needle »

I'm 65 and have both a Trad and Roth IRA. The Roth was opened more than 5 years ago,

I plan to begin converting some of my Trad to Roth.

When I do this, does the five year rule apply to the date I convert funds? Or did I already meet the five year rule?
Enjoy what Mother Nature has given you before Father Time takes it away.
Silk McCue
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Re: Roth conversion after 60

Post by Silk McCue »

You are fully in the clear. Over 59.5 and 5 years since opening your first Roth. This authoritative table confirms that.

https://www.bogleheads.org/wiki/User:Te ... Roth_Table

Cheers
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retiredjg
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Re: Roth conversion after 60

Post by retiredjg »

There is more than one 5 year rule, but you don't have to worry about it.

You are old enough (over 59.5) and you made your first contribution to Roth IRA more than 5 years ago....so all the money in Roth IRA, including new conversions, is available to you any time with no tax and no penalty.
Topic Author
space needle
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Re: Roth conversion after 60

Post by space needle »

thank you very much.
Enjoy what Mother Nature has given you before Father Time takes it away.
MrLoco
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Re: Roth conversion after 60

Post by MrLoco »

Be careful here.

I believe than every time you do a Roth Conversion...a NEW 5 year clock begins on any FUTURE earnings that cannot be withdrawn for 5 years.
Silk McCue
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Re: Roth conversion after 60

Post by Silk McCue »

MrLoco wrote: Fri Jan 21, 2022 6:02 am Be careful here.

I believe than every time you do a Roth Conversion...a NEW 5 year clock begins on any FUTURE earnings that cannot be withdrawn for 5 years.
That is simply wrong. This is a well worn and fully vetted topic on this site.

Please reference the Wiki page I provided above and will provide here again.

https://www.bogleheads.org/wiki/User:Te ... Roth_Table

Cheers
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retiredjg
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Re: Roth conversion after 60

Post by retiredjg »

MrLoco wrote: Fri Jan 21, 2022 6:02 am Be careful here.

I believe than every time you do a Roth Conversion...a NEW 5 year clock begins on any FUTURE earnings that cannot be withdrawn for 5 years.
Every Roth conversion does start a new clock. But....

1. The new clock is not on the earnings from that conversion - however you are the second person to say that recently, so you may both have read the same misleading (or incorrect) article.

2. Penalties go away at 59.5 so there are no penalties for people over that age.

3. Taxes on earnings go away when the Roth iRA is "qualified" (59.5 and more than 5 years since first Roth IRA contribution).

It is a very confusing subject and even reputable and respected journals can get it wrong (I read one just recently :shock: )
Silk McCue
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Re: Roth conversion after 60

Post by Silk McCue »

retiredjg wrote: Fri Jan 21, 2022 7:04 am
Every Roth conversion does start a new clock. But....
Can you please clarify this statement in light of our agreement that at age 59.5 and five years since opening the first Roth that there is no clock tax or penalty associated with any an all withdrawals including those on the day after a conversion.

Help me understand what clock that conversion starts. That very statement seems to me to add confusion to this topic.

Cheers
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retiredjg
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Re: Roth conversion after 60

Post by retiredjg »

Silk McCue wrote: Fri Jan 21, 2022 7:24 am
retiredjg wrote: Fri Jan 21, 2022 7:04 am
Every Roth conversion does start a new clock. But....
Can you please clarify this statement in light of our agreement that at age 59.5 and five years since opening the first Roth that there is no clock tax or penalty associated with any an all withdrawals including those on the day after a conversion.

Help me understand what clock that conversion starts. That very statement seems to me to add confusion to this topic.

Cheers
You are right. My reply may be confusing.

I was trying to say that a conversion starts a clock but that in certain cases the clock does not matter...which (to me) is the same thing as "no clock".

I guess I think that is easier to understand than "some conversions start a clock and some don't and some start a clock that ends before 5 years" and so on.

What I find interesting is that MrLoco thought the clock attached to future earnings of the conversion instead of the conversion itself. I ran into that a few weeks ago. I'm wondering where that misunderstanding came from.
MrLoco
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Re: Roth conversion after 60

Post by MrLoco »

Silk McCue wrote: Fri Jan 21, 2022 6:33 am
MrLoco wrote: Fri Jan 21, 2022 6:02 am Be careful here.

I believe than every time you do a Roth Conversion...a NEW 5 year clock begins on any FUTURE earnings that cannot be withdrawn for 5 years.
That is simply wrong. This is a well worn and fully vetted topic on this site.

Please reference the Wiki page I provided above and will provide here again.

https://www.bogleheads.org/wiki/User:Te ... Roth_Table

Cheers
That chart doesn't look right.
THis is from Kitces:

" Unlike the 5 year rule for contributions, in the case of conversions, each conversion has its OWN 5 year time period. Thus with multiple conversions there may be mutliple 5 year periods underway at once. When withdrawals occur from conversion amounts, they are deemed to be withdrawn on a first-in, first out basis, which effectively means the oldest conversion are withdrawn first, and the most recent conversions withdrawn last. Overall, the ordering rules from ROTH IRA's stipulate that withdrawals are after-tax contributions first, conversions second, and earnings third."

This makes sense as one cannot do a $50,000 Roth conversion this year ( assume over age 59 1/2 AND the Roth account has been open for 5 years)
and two years from now withdraw the entire amount.

At least that is the way I see it. Best to let a CPA figure it out.
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retiredjg
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Re: Roth conversion after 60

Post by retiredjg »

MrLoco wrote: Fri Jan 21, 2022 9:50 am
Silk McCue wrote: Fri Jan 21, 2022 6:33 am
MrLoco wrote: Fri Jan 21, 2022 6:02 am Be careful here.

I believe than every time you do a Roth Conversion...a NEW 5 year clock begins on any FUTURE earnings that cannot be withdrawn for 5 years.
That is simply wrong. This is a well worn and fully vetted topic on this site.

Please reference the Wiki page I provided above and will provide here again.

https://www.bogleheads.org/wiki/User:Te ... Roth_Table

Cheers
That chart doesn't look right.
THis is from Kitces:

" Unlike the 5 year rule for contributions, in the case of conversions, each conversion has its OWN 5 year time period. Thus with multiple conversions there may be mutliple 5 year periods underway at once. When withdrawals occur from conversion amounts, they are deemed to be withdrawn on a first-in, first out basis, which effectively means the oldest conversion are withdrawn first, and the most recent conversions withdrawn last. Overall, the ordering rules from ROTH IRA's stipulate that withdrawals are after-tax contributions first, conversions second, and earnings third."
This is all correct, but it is not the entire story. If the 5 year clock has not finished, there is a penalty for taking the money out....except that the penalties go away at age 59.5.

This makes sense as one cannot do a $50,000 Roth conversion this year ( assume over age 59 1/2 AND the Roth account has been open for 5 years) and two years from now withdraw the entire amount.
Yes. This absolutely can be done.
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retiredjg
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Re: Roth conversion after 60

Post by retiredjg »

Kitces wrote: " Unlike the 5 year rule for contributions, in the case of conversions, each conversion has its OWN 5 year time period.
Silk McCue, it is because I know that reputable people like Kitces have said this exact thing that causes me to explain it as "yes, there may be a clock, but there is no penalty if you are over 59.5" rather than trying to say "there is no clock".

But I agree with you that my answer didn't add clarity. :?
rkhusky
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Re: Roth conversion after 60

Post by rkhusky »

If the text you are reading does not differentiate between before and after age 59.5, it is incomplete. Read further, or if the entire article is missing that distinction, disregard the article.
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retired@50
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Re: Roth conversion after 60

Post by retired@50 »

MrLoco wrote: Fri Jan 21, 2022 9:50 am THis is from Kitces:
Is the Kitces article referring to using Roth money for an early retiree?

In other words, is the article about a Roth conversion ladder? This strategy does involve keeping track of individual 5 year windows.

See link: https://www.investopedia.com/how-roth-c ... ks-5214808

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
rkhusky
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Re: Roth conversion after 60

Post by rkhusky »

retired@50 wrote: Fri Jan 21, 2022 10:07 am
MrLoco wrote: Fri Jan 21, 2022 9:50 am THis is from Kitces:
Is the Kitces article referring to using Roth money for an early retiree?

In other words, is the article about a Roth conversion ladder? This strategy does involve keeping track of individual 5 year windows.

See link: https://www.investopedia.com/how-roth-c ... ks-5214808
That article is for withdrawing before age 59.5.
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retired@50
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Re: Roth conversion after 60

Post by retired@50 »

rkhusky wrote: Fri Jan 21, 2022 10:14 am
retired@50 wrote: Fri Jan 21, 2022 10:07 am
MrLoco wrote: Fri Jan 21, 2022 9:50 am THis is from Kitces:
Is the Kitces article referring to using Roth money for an early retiree?

In other words, is the article about a Roth conversion ladder? This strategy does involve keeping track of individual 5 year windows.

See link: https://www.investopedia.com/how-roth-c ... ks-5214808
That article is for withdrawing before age 59.5.
I know, that's why I mentioned it, as a possible point of confusion for MrLoco.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
HeelaMonster
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Re: Roth conversion after 60

Post by HeelaMonster »

retiredjg wrote: Fri Jan 21, 2022 9:56 am
MrLoco wrote: Fri Jan 21, 2022 9:50 am
Silk McCue wrote: Fri Jan 21, 2022 6:33 am
MrLoco wrote: Fri Jan 21, 2022 6:02 am Be careful here.

I believe than every time you do a Roth Conversion...a NEW 5 year clock begins on any FUTURE earnings that cannot be withdrawn for 5 years.
That is simply wrong. This is a well worn and fully vetted topic on this site.

Please reference the Wiki page I provided above and will provide here again.

https://www.bogleheads.org/wiki/User:Te ... Roth_Table

Cheers
That chart doesn't look right.
THis is from Kitces:

" Unlike the 5 year rule for contributions, in the case of conversions, each conversion has its OWN 5 year time period. Thus with multiple conversions there may be mutliple 5 year periods underway at once. When withdrawals occur from conversion amounts, they are deemed to be withdrawn on a first-in, first out basis, which effectively means the oldest conversion are withdrawn first, and the most recent conversions withdrawn last. Overall, the ordering rules from ROTH IRA's stipulate that withdrawals are after-tax contributions first, conversions second, and earnings third."
This is all correct, but it is not the entire story. If the 5 year clock has not finished, there is a penalty for taking the money out....except that the penalties go away at age 59.5.
What he (retiredjg) said. I believe this is the article by Kitces quoted above, in which he ALSO says...

"For others, the reality is that the Roth conversion 5-year rule is a moot point anyway, because they already meet another exception to the early withdrawal penalty (e.g., already being over age 59 1/2). "... and....

"On the other hand, as noted earlier, if the individual is otherwise exempt from the early withdrawal penalty (e.g., by being over age 59 1/2), the withdrawal of conversion principal is penalty-free (over 59 1/2) and tax-free (as it was already taxed at conversion). Thus, for those who are already over age 59 1/2 (or totally disabled), the Roth conversion 5-year rule is essentially a moot point, and only the 5-year rule for contributions remains relevant." ...and...

Thus, withdrawals within 5 years of conversion by someone who is already over age 59 1/2 are not subject to the early withdrawal penalty, regardless of the 5-year conversion rule, simply because being over age 59 1/2 itself is an exception to the penalty!

https://www.kitces.com/blog/understandi ... nversions/
Last edited by HeelaMonster on Fri Jan 21, 2022 10:33 am, edited 1 time in total.
Silk McCue
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Re: Roth conversion after 60

Post by Silk McCue »

MrLoco wrote: Fri Jan 21, 2022 9:50 am
Silk McCue wrote: Fri Jan 21, 2022 6:33 am
MrLoco wrote: Fri Jan 21, 2022 6:02 am Be careful here.

I believe than every time you do a Roth Conversion...a NEW 5 year clock begins on any FUTURE earnings that cannot be withdrawn for 5 years.
That is simply wrong. This is a well worn and fully vetted topic on this site.

Please reference the Wiki page I provided above and will provide here again.

https://www.bogleheads.org/wiki/User:Te ... Roth_Table

Cheers
That chart doesn't look right.
THis is from Kitces:

" Unlike the 5 year rule for contributions, in the case of conversions, each conversion has its OWN 5 year time period. Thus with multiple conversions there may be mutliple 5 year periods underway at once. When withdrawals occur from conversion amounts, they are deemed to be withdrawn on a first-in, first out basis, which effectively means the oldest conversion are withdrawn first, and the most recent conversions withdrawn last. Overall, the ordering rules from ROTH IRA's stipulate that withdrawals are after-tax contributions first, conversions second, and earnings third."

This makes sense as one cannot do a $50,000 Roth conversion this year ( assume over age 59 1/2 AND the Roth account has been open for 5 years)
and two years from now withdraw the entire amount.

At least that is the way I see it. Best to let a CPA figure it out.

We have CPAs here and the Wiki info is fully vetted. At some point you have to accept that folks here actually know that they are talking about. Disputing those facts based upon your read of Kitces will not overturn that.

Cheers
big8pointer
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Re: Roth conversion after 60

Post by big8pointer »

You are old enough (over 59.5) and you made your first contribution to Roth IRA more than 5 years ago....so all the money in Roth IRA, including new conversions, is available to you any time with no tax and no penalty.
As stated earlier... good to go with all $$ withdrawn and no penalty.
utvolfan
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Re: Roth conversion after 60

Post by utvolfan »

So if we are age 59.5, can we do Roth conversions into our current Roth accounts without worrying about the record keeping for the 5 year rule or actually any rules? Or do we still need to open a new Roth?

I believe previously, and it may have been before reaching 59.5, I read that alot of people opened a new Roth each year they did a conversion. Perhaps to make keeping up with the 5 year rule easier?
Thanks.
MrJedi
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Re: Roth conversion after 60

Post by MrJedi »

MrLoco wrote: Fri Jan 21, 2022 9:50 am
Silk McCue wrote: Fri Jan 21, 2022 6:33 am
MrLoco wrote: Fri Jan 21, 2022 6:02 am Be careful here.

I believe than every time you do a Roth Conversion...a NEW 5 year clock begins on any FUTURE earnings that cannot be withdrawn for 5 years.
That is simply wrong. This is a well worn and fully vetted topic on this site.

Please reference the Wiki page I provided above and will provide here again.

https://www.bogleheads.org/wiki/User:Te ... Roth_Table

Cheers
That chart doesn't look right.
THis is from Kitces:

" Unlike the 5 year rule for contributions, in the case of conversions, each conversion has its OWN 5 year time period. Thus with multiple conversions there may be mutliple 5 year periods underway at once. When withdrawals occur from conversion amounts, they are deemed to be withdrawn on a first-in, first out basis, which effectively means the oldest conversion are withdrawn first, and the most recent conversions withdrawn last. Overall, the ordering rules from ROTH IRA's stipulate that withdrawals are after-tax contributions first, conversions second, and earnings third."

This makes sense as one cannot do a $50,000 Roth conversion this year ( assume over age 59 1/2 AND the Roth account has been open for 5 years)
and two years from now withdraw the entire amount.

At least that is the way I see it. Best to let a CPA figure it out.
I have a better idea. Go straight to the horse's mouth: the IRS.

https://www.irs.gov/publications/p590b# ... 1000231061
Additional Tax on Early Distributions
If you receive a distribution that isn't a qualified distribution, you may have to pay the 10% additional tax on early distributions
What Are Qualified Distributions?
A qualified distribution is any payment or distribution from your Roth IRA that meets the following requirements.

It is made after the 5-year period beginning with the first tax year for which a contribution was made to a Roth IRA set up for your benefit.
The payment or distribution is:
Made on or after the date you reach age 59½,
Silk McCue
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Re: Roth conversion after 60

Post by Silk McCue »

utvolfan wrote: Fri Jan 21, 2022 2:43 pm So if we are age 59.5, can we do Roth conversions into our current Roth accounts without worrying about the record keeping for the 5 year rule or actually any rules? Or do we still need to open a new Roth?

I believe previously, and it may have been before reaching 59.5, I read that alot of people opened a new Roth each year they did a conversion. Perhaps to make keeping up with the 5 year rule easier?
Thanks.
Opening separate Roth’s for each conversion is not necessary before or after 59.5. People do lots of things that aren’t necessary.

You should have be able to show that the first Roth was opened at least 5 years ago. Since you are over 59.5 nothing else really matters.

Cheers
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retiredjg
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Re: Roth conversion after 60

Post by retiredjg »

utvolfan wrote: Fri Jan 21, 2022 2:43 pm So if we are age 59.5, can we do Roth conversions into our current Roth accounts without worrying about the record keeping for the 5 year rule or actually any rules? Or do we still need to open a new Roth?
You do not have to worry about a penalty for taking out Roth conversions before the clock has finished - because the penalty for doing so has gone away for you (at 59.5).

You may still have to pay tax (not penalty) if you take out any earnings that have occurred inside the Roth IRA since you first opened it.

If your first contribution was less than 5 tax years ago, tax would be due on earnings (the last thing to come out of the account). If your first contribution to Roth IRA was more than 5 tax years ago, you are free to take anything you want with no tax and no penalty.
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Peter Foley
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Re: Roth conversion after 60

Post by Peter Foley »

I've copied these rules to a number of Roth threads and have not been challenged on their accuracy. I think the last note is the one being questioned here.

Re: Roth IRA Rules - Table Approach
Posted by: KAWill (IP Logged)
Date: October 14, 2010 11:57PM


Roth IRA Distribution Table

UNDER AGE 59.5
FIVE YEAR CONVERSION HOLDING PERIOD NOT MET

Contributions: Tax-No; Penalty-No
Conversions: Tax-No; Penalty-Yes (Taxable Portion)
Conversions: Tax-No ;Penalty-No (Nontaxable Portion)
Earnings: Tax-Yes; Penalty-Yes

UNDER AGE 59.5
FIVE YEAR CONVERSION HOLDING PERIOD MET

Contributions: Tax-No; Penalty-No
Conversions: Tax-No; Penalty-No (Taxable Portion)
Conversions: Tax-No; Penalty-No (Nontaxable Portion)
Earnings: Tax-Yes; Penalty-Yes

OVER AGE 59.5
LESS THAN FIVE YEARS SINCE OPENING FIRST ROTH IRA

Contributions: Tax-No ;Penalty-No
Conversions: Tax-No; Penalty-No (Taxable Portion)
Conversions: Tax-No; Penalty-No (Nontaxable Portion)
Earnings: Tax-Yes; Penalty-No

OVER AGE 59.5
FIVE YEARS OR MORE SINCE OPENING FIRST ROTH IRA

All Distributions Are Qualified
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