Roth 5-Year Rule: Does It Still Matter after 59.5?

There are two 5-year rules, one for the Roth 401(k) and one for a Roth IRA. Do they still matter after age 59.5?
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Mike Bernard, CFP® offers advisory services through KFG Wealth Management, LLC dba Korhorn Financial Group. This information is for general financial education and is not intended to provide specific investment advice or recommendations. All investing and investment strategies involve risk, including the potential loss of principal. Asset allocation & diversification do not ensure a profit or prevent a loss in a declining market. Past performance is not a guarantee of future results.
Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, and CFP® (with plaque design) in the United States to Certified Financial Planner Board of Standards, Inc., which authorizes individuals who successfully complete the organization’s initial and ongoing certification requirements to use the certification marks.

[@lincoln-tser]

A guy asked if he should take a HELOC for a home renovation. I said, "I wouldn't," and suggested saving instead. He didn't reply. Many homeowners are surprised by the idea of saving money instead of using home equity for projects like a backyard deck. I chose to save and invest in the stock market instead, which has helped me build long-term financial stability without taking on additional debt.

[@GREGG-43]

What advice would you give to someone new to investing with around $80,000 to begin with?

[@c.o.l.ek500]

I believe a healthy portfolio has 3 things, at the bare minimum: Exposure to ETFs for increased diversification, Exposure to assets that generate cash flow like dividend stocks, Exposure to market-leading tech.

[@MiddleclassAmerican-7220]

Hello, I'm interested in trying this out. Who is your advisor, and how can I contact them?

[@NotyourBusiness-urto6]

Thanks for sharing. I curiously searched for her full name and her website popped up immediately. I looked through her credentials and did my due diligence before contacting her.

[@alexsteven.m6414]

Hello, I am due for retirement in two years, I'm a senior citizen but I'm curious to know best how people split their pay, how much of it goes into savings, spendings or investments, I earn around $50K per year but nothing to show for it yet.

[@mariahudson9939]

In this current unstable markets, It is advisable to diversify while retaining 70-80% in secure investments. looking at your budget, you should consider financial advisory.

[@PremSteve-yg4de]

I think you're better off with majority investment in S&P500 and uprising equities cos they always outperform. Also speaking with an advisor can help with pointers. I've been in contact with one I reached through commentaries here, she has been really helpful.

[@dengdelun3109]

impressive gains! how can I get your advlsor please, if you dont mind me asking? I could really use a help as of now

[@PremSteve-yg4de]

"Rebecca Nassar Dunne" is the licensed fiduciary I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.

[@AnthonyMaxwell-pb1sd]

I’ve always spent less than what I made. I’ve always paid myself 1st. by using payroll deductions. If I got a raise I increased the pay roll deduction. I never went down on the deduction until I reached 59 and I started at 30. I decreased by about 50% I took more vacations that year and inflation caught up to me. I never borrowed against the funds.

[@DonaldMark-ne7se]

With Roth IRA, the money you are contributing has already been taxed. At any time for any reason, you can withdraw your contributions tax-free and penalty-free. Additionally, any earnings on investments can also be withdrawn tax-free and penalty-free, Not sure how much to contribute, I'm still at a crossroads deciding if to liquidate my $338k stock portfolio.

[@Jamessmith-12]

For the average person, the strategies are fairly demanding. In actuality, most professionals who have the necessary abilities and knowledge to complete such occupations do so successfully.

[@JacquelinePerrira]

I agree, that's the more reason I prefer my day to day investment decisions being guided by an advisor, seeing that their entire skillset is built around going long and short at the same time both employing risk for its asymmetrical upside and laying off risk as a hedge against the inevitable downward turns, coupled with the exclusive information/analysis they have, it's near impossible to not out-perform, been using my advisor for over 2years+ and I've netted over 2.8million.

[@kevinmarten]

How can I reach this adviser of yours? because I'm seeking for a more effective investment approach on my savings?

[@JacquelinePerrira]

'Carol Vivian Constable, a highly respected figure in her field. I suggest delving deeper into her credentials, as she possesses extensive experience and serves as a valuable resource for individuals seeking guidance in navigating the financial market.

[@kevinmarten]

She appears to be well-educated and well-read. I ran an online search on her name and came across her website; thank you for sharing.

[@consciouscrypto3090]

So let me make sure I got this straight: 1) You can always withdraw your initial contribution so long as it wasn't from a roth conversion. Age of person and roth don't matter for that. 2) You can only withdraw your earnings once 59.5 AND if you've had a roth IRA at least 5 years, again ignoring conversions 3) If you convert to a roth, 5 year rule applies to each conversion year until you are 59.5, and this applies to both the initial contribution and earnings Did I get that right?

[@BrewNoCarbs]

I have an $800k portfolio from my old job and retired six years ago. Lately, it’s been doing poorly, with only 6% growth in the past three years and I feel stuck. I desperately need to revamp my investments. Any advice on what to do with my money would be greatly appreciated.

[@Type57SC]

This is what people that handle their p0rtfolio themselves go through. I will advice you get yourself some fiduciary advisōr to help you make better p0rtfolio decisions.

[@rrandd0]

I agree, investing with the help of an advisor set me up for life with about $1.6m currently in stock portfolio. I max out my 401k and have few properties. I worked hard as a language tutor for 32 years, and my salary was just over 80k annually. It all boils down to consistent regular investing to minimize risks and maximize growth.

[@dr.Morgann]

I'm interested in trying this out. Who is your advisor, and how can I contact them?

[@rrandd0]

I'm cautious about giving specific recommendations since this is an online forum and everyone situation is unique, but I've worked with "Melissa Elise Robinson" for years and highly recommend her. Look her up to see if she meets your criteria.

[@dr.Morgann]

Thanks for sharing. I curiously searched for her full name and her website popped up immediately. I looked through her credentials and did my due diligence before contacting her.

[@thomasridley458]

Thank You!!! This was certainly the best explanation of the 5-year rule and the two parts. The second part was most important to me and frustratedly unfair and unclear to me. But you have enlightened me on the second part of the rule as it relates to conversions. Age 59.5 is the key as it relates to Roth conversations, once that mark is met all that money is usable at any time. Thank you Sir!!

[@rayanderson3164]

Thank you. This really cleared up the rules. Retiring next spring at 55 and then 59.5 here we come!

[@MaryLawson874]

keep up the good work! is this a financial advise?

[@EdmundEthan093]

The economy is grappling with uncertainties, global fluctuations, and pandemic aftermath, causing instability. Rising inflation, sluggish growth, and trade disruptions need urgent attention from all sectors to restore stability and stimulate growth.

[@roxdietren]

@@EdmundEthan093 Things are strange right now. The US dollar is becoming less valuable because of inflation, but it's getting stronger compared to other currencies and things like gold and property. People are turning to the dollar because they think it's safer. I'm worried about my retirement savings losing value because of high inflation. Where else can we keep our money?

[@AlfredStephen127]

@@roxdietren Due to my demanding job, I lack the time to thoroughly assess my investments and analyze individual stocks. Consequently, for the past seven years, I have enlisted the services of a fiduciary who actively manages my portfolio to adapt to the current market conditions. This strategy has allowed me to navigate the financial landscape successfully, making informed decisions on when to buy and sell. Perhaps you should consider a similar approach.

[@roxdietren]

@@AlfredStephen127 this is definitely considerable! think you could suggest any professional/advisors i can get on the phone with? i'm in dire need of proper portfolio allocation

[@AlfredStephen127]

Jessica Dawn Walters , a renowned figure in her line of work. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market.

[@rickarmstrong3944]

Best explanation for Roth IRA rules I've ever seen.

[@elgrancabron]

No Kidding! Cuts right through the crap. I wish I could find someone like him in Phoenix... Most of the people I talk to are only interested in getting my assets under their management so they can pay off that new BMW... 😞

[@everettcalhoun8197]

@@elgrancabron It's not only Phoenix.

[@mattr2913]

This video is the most clear and informative video I found on this topic. Thanks for making it.

[@beefcreeb96]

We obviously could use a definitive rule from the IRS on Rule #2, but your analysis is very logical. Thanks.

[@KarenDemille]

Yes there are many little rules and have been delays in providing some of the rules as well. When a Roth account is inherited by a non-spouse, or when the non-spouse beneficiary dies and a contingent beneficiary inherits the contingent may not have their own 10 year time period, and perhaps the balance of the original beneficiary's 10 year period. Always pay to be informed!

[@jxo1]

Best roth explanation I've heard. TY

[@BarbHurley-s6m]

Agreed!!

[@geremi140]

I'm 60 and have a Roth IRA over 5 years, if i start a Roth 401k with my company how does the 5 year rule apply to the 401k?

[@jlam3927]

Two five year rules (well 3 if you include inheritance) and two "penalties" 1. income tax 2. 10% early withdrawal. Complicated indeed and there are many sites out there that get this wrong. This video is 100% correct. Always cross reference info on the IRS website as that is the final word on the subject.

[@KarenDemille]

I agree with your comments, BUT not all CPA's and Financial Advisors are thoroughly up on all the specifics of Roth accounts and Roth conversions. I have recently completed our series of Roth Conversions and have purposely not converted every last penny into our Roth accounts. What has greatly helped us was having a cash reserve for the taxes and always having an avoidance to most debt. Sure some of the recent mortgage rates have been wonderful and I can appreciate how nice it'd be to have one(if I needed one). 50+ years ago I inherited $3500 from my grandfather that was meant to be for college. I got my degree while also working and I still had that chunk of inheritance. My parents chose not to bequest money to their grandchildren, so I decided to open Roth accounts for our children and one part time working teenager. Like a teenager, college impo9rtance is not always understood, but I trust there will be a time when my heirs will appreciate my efforts!

[@consciouscrypto3090]

1) You can always withdraw your initial contribution so long as it wasn't from a roth conversion. Age of person and roth don't matter for that. 2) You can only withdraw your earnings once 59.5 AND if you've had a roth IRA at least 5 years, again ignoring conversions 3) If you convert to a roth, 5 year rule applies to each conversion year until you are 59.5, and this applies to both the initial contribution and earnings Did I get that right?

[@jlam3927]

@@consciouscrypto3090 1) Yes contributions are always available for withdrawal without any penalty, BUT the IRS expects you to track/report it for certain withdrawals before 59 1/2 on Form 8606 - Part 3. They want to make sure you aren't withdrawing anything that's subject to tax or penalty. 2) You are correct, but to clarify you CAN withdraw it, BUT you will be subject to tax and penalties. 3) This one gets weird. Conversions are NEVER subject to taxes (you already paid taxes upon conversion), only the 10% early withdrawal penalty applies if before 5 years (for each conversion) and before 59 1/2. This is why that penalty goes away completely after 59 1/2.

[@RichRocketMan]

Sounds correct!

[@longgone9738]

@@consciouscrypto3090No. The IRS classifies Roth money three ways. 1) Contributions. 2) Conversions. 3) Earnings. It also expects withdrawals to follow the SAME order. Therefore, both contributions and conversions can be withdrawn tax-free at any time and any age BECAUSE taxes on those funds have already been paid. Earnings, however, are subject to taxation until the IRA account has been open 5-years and until the account owner has reached age 59.5.

[@JeanPierreWhite]

This video is excellent. I asked my advisor about the 5-year rule and didn't get an answer. This answers all my questions and clears up a confusion I had about the 5-year rule. I had no idea about the 1-year rule for the kids. That sounds awesome.

[@Andreavince-v]

Retired at age 53, I am in my early 60s. Because they couldn't understand the idea of not working if you don't have to, many individuals resisted me. I viewed my life in phases. In my latter years, I owe it to myself to "stop and smell the roses," even if I have worked hard to get everything I have now. My situation is that I retired and moved to Latin America. It made it possible for me to enjoy my new surroundings while escaping all the bad things that were going on in America. None of the people I've met regret retiring.

[@pauline-o2q]

Nice way to retire. For me, I believe retirees who struggle to meet their basic needs are the ones who could not accumulate enough money during their active years to meet their needs. Retirement choices determine a lot of things. My wife and I both spent same number of years in the civil service, she invested through a wealth manager and myself through the 401k. We both still earning after our retirement fund has grown way more than it would have with just the 401(k). Haha.

[@CharlesT.Foster]

I think this is something I should do, but I've been stalling for a long time now. I don't really know which firm to work with; I feel they are all the same but it seems you’ve got it all worked out with the firm you work with so i surely wouldn’t mind a recommendation.

[@Saviourtina-c4i]

Thank you for this Pointer. It was easy to find your handler, She seems very proficient and flexible. I booked a call session with her.

[@le9051]

I was aware of the second 5 year rule but not the first five year rule. And the reason is because I did a conversion many years ago. It was a small one but it was in my mind a security blanket kind of decision. That security blanket I thought I needed never came to fruition but now I have a Roth IRA because of it so when I retire I can move my Roth 401k into that IRA and I don't have to wait 5 years to touch any of that money? That's what I heard him say

[@Jacq892]

Good info, my husband is 68 has had a roth for 5 years we plan on adding small conversions. I wondered why we couldn't use it just like a tax free cash account. Dip in when needed, yes we can somewhat.

[@bluegillmich]

Penalities exist if you withdraw before 59.5( i have done it )..lost the savers credit for 3 years when i took $600 out when i had a surgery,,i figure it cost me more than $600 lost savings ....2. I have a co-worker whom asked me about opening a Roth and doing conversions( he just turned 60 and his wife also)....good info

[@dylanmoris6211]

I just switched up my Roth IRA to 50% SCHD, 25% SCHX, 25% SCHG, and my Roth 401k is 70% vanguard S&P 500 index, 20% vanguard growth index, and 10% vanguard international index. Seeking best possible ways to grow $350k into $1m+ before retirement, I'm 55.

[@KelvinWallace]

the strategies are quite rigorous for the regular-Joe. As a matter of fact, they are mostly successfully carried out by pros who have had a great deal of skillset/knowledge to pull such trades off.

[@Markjohnson09]

True. Having the right financial planner is invaluable. My portfolio is well-matched for every season of the market and recently hit 90% rise from early last year. I and my CFP are working on a 7 figure ballpark goal, though this could take till Q3 2024.

[@halimatanko7538]

@@Markjohnson09 impressive gains! how can I get your advisor please, if you dont mind me asking? I could really use a help as of now

[@Markjohnson09]

I'm cautious about giving specific recommendations since everyone's situation varies, but I've worked with Marisa Michelle Litwinsky` for years and highly recommend her. Look her up to see if she meets your criteria.

[@halimatanko7538]

@@Markjohnson09 Thank you for this tip. It was easy to find your coach. Did my due diligence on her before scheduling a phone call with her. She seems proficient considering her résumé.

[@1peon]

What about TSP or Roth TSP? When I retired, I rolled over my TSP and Roth TSP to a Traditional and Roth IRA. Does this 5 year rule still apply?

[@jeangreen432]

Thank you for this great breakdown of the mysterious Roth rules, great video!!

[@pware9643]

Not sure if he really clarified the difference between original conversion amount vrs the gains-interest-div cap appreciation of the original amount. I understand that if you convert ira to Roth over 59.5.. you can take out the Basis.. or original conversion amount ... anytime.. no tax no penalty.

[@voyagerman22]

Great video, thanks. Just to clarify, if I have had a Roth IRA account open for 5 years and I’m over age 59-1/2, there are no more 5 year rules for each Roth conversion? So I could do a conversion at age 61 and then take out the full amount, including any earnings growth, at age 62, tax free?

[@shilver101]

I inherited a traditional IRA I took out 22k, after a month and they held 10%(federal) of the withdrawal a little over 2k..... i know i am going to have to pay more taxes on that withdrawal but does anyone know how much more?

[@elgrancabron]

Outstanding! This is the kind of common sense information I need! How come I can't find someone like you around here? I keep interviewing retirement/financial planners that don't know everything I do... 😞 I guess the only problem I have now is when and how much pre-tax IRA investments should I convert. Right now I'm told if I convert too much my taxes will be through the roof even though I'm retiring...

[@bdtn342]

Just to be clear. After age 59.5, If I roll over money from my 401k into my roth IRA that I've had for more than 5 years, I do not have to wait 5 years to use that money, correct?

[@3pilot]

since you're both over 59.5 and have had Roth IRA for 5+years..then you have no constraints on taking money out 8:58

[@le9051]

I asked and want confirmation on this as well

[@DunRovinRanch-1969]

@@3piloteach conversion has a 5year rule. I read the IRS literature on it. My understanding is that the money you paid tax on is available immediately but the earnings are under the 5year rule.

[@3pilot]

@@DunRovinRanch-1969 doesn’t apply after 59.5 tho

[@freecycling6687]

So say I transfer $10,000 to a Roth IRA account that's already met the first 5-year rule. Will even that principal amount (not the interest) of $10K be subject to tax if I withdraw it from the Roth before it's been there for 5 years?

[@DG-ym5vb]

This was amazing. I do have Roth IRA for many years. approaching 53 within weeks, I also have a traditional IRA. I am a little confused about the transition from Traditional to Roth? Can you assist with a comment to me. than you. Super informative.

[@johnchatelle217]

I have a small amount of money characterized as a ROTH 401K. Does that count for the 1st 5 year rule? i want to move that money into a ROTH IRA, then start characterizing traditional 401K money into a ROTH IRA. Did both 5 year rules start "ticking" when I characterized money as a ROTH 401K?

[@dandaugherty5916]

Hello, I've been intently watching retirement videos recently as I'm looking at retirement in 5 years (now 58). This is the first I'm hearing about a 5 year rule. I've been contributing for years in my 401K and started many years ago also contributing to my 401K Roth account. Are you saying I need to get a Roth IRA account set up ASAP? Also, if I do put $100 in a Roth IRA, after the 5 years, can I take the growth from my Roth 401K without penalty since it's not doing a conversion, it's just a withdraw from a Roth account?

[@Pje3ski]

Good video covered all the bases on the 5 year rules.

[@CrayonEater94]

If I’m 100 % permanent and total disabled through the VA. Do I need to wait until 59 1/2?

[@onlywenilaugh6589]

I had these straight in my head already. Glad I've been paying attention and learning. :)

[@cometcal2]

Let's say I am 60 years old and currently have $50k in a Roth IRA. I also have a regular IRA with $50k in it. If I do a Roth conversion on the $50k regular IRA and put it into my existing Roth account, do I have $100k that I can withdraw at any time?

[@FrankFrankie-55]

@cometcal2 I'd say it depends when you first contributed to the Roth IRA. If it has been more than 5 years since you first contributed to the Roth IRA then YES you have $100K you can withdraw tax free/penalty free (assuming you paid the taxes on that rollover with other funds not part of the conversion dollars). if it has not been 5 years since you first contributed to the Roth IRA then the answer is NO (based on what I got out the Wise Money Show video above ). For example lets say you open and funded the Roth only 4 years ago. Lets also say you contributed $7000 per year for 4 years. Your contribution total is $28,000. If your account balance is $50,000 then you have $22,000 worth of earnings on that 28K. After you convert $50,000 from your Traditional IRA to your Roth this is what you have. $28,000 of Contributions, $22,000 worth of earnings, $50,000 from the Rollover. but you can only withdraw the $28,000 of Contributions + $50,000 Rollover dollars = $78,000 tax free and penalty free. I f you withdraw more you will be hit with the 10% early withdraw penalty. I think the 10% penalty would only be on the $$$ over 78K but I am not sure. Someone please correct me if I am wrong.

[@everettcalhoun8197]

@@FrankFrankie-55 I was told by the IRS that every conversion from a 401k or IRA to a Roth had it's own 5 year rule.

[@naciobc]

Can I withdraw @10K from a Roth 403B with no penalty if I use the funds to buy a house as a first-time home buyer and I am not 59.5 years old? I left my employer last year but have not rolled over the Roth 403B from the financial institution.

[@sissys6284]

If you have a seaskndd Roth Ira account, which is not the sccount you are drawing from, and you are over 60, are you ok to withdraw?

[@valleyofiron125]

This video should have had a graphic presentaion the whole time. The verbal descriptions are too hard to follow. I missed the point on 90% of this.

[@shockwave1126]

So if I have Roth1 held over 5 years and now I open Roth 2, Roth 2 doesn’t have to wait 5 years? I’m over 59.5.

[@johnbfishing]

Is it advisable to make a “new” Roth account with each conversion? Or can I combine each rollover into the same account? First was done 10 years ago. I’m over 59.5. The fund in my Roth is closed to new investors so if I fund a new account, I will be unable to purchase additional shares.

[@longgone9738]

Depends on careful record keeping. I have a SINGLE Roth account, and just track my 1) contributions, 2) conversions, but do not worry much about “earnings” because the default method the IRS uses in its formulas is contributions, then conversions, then earnings when distributions are taken out.

[@williampennjr.4448]

I just turn 57 and started funding a Roth IRA, that mean's I cant withdraw any of the money until I turn 62 without a penalty?

[@ysaganiybarra6661]

I plan to retire at 65. I will have my Roth IRA over 15 years by then. Is there a time limit to start withdrawing?

[@FrankFrankie-55]

Not in your life time. But your beneficiaries will a time limit.

[@Gloppp]

Think i got it - Never had a roth so even though i am 59.5 if i convert my pre-tax 457b inti a Roth, pat the taxes doing so i cant touch it for 5 years - Great info & i will look into dropping it into my Vanguard Digital Advisor instead or i could just leave it and pay the tax as i pull monthly checks

[@jaypaladin-havesmartswilll5508]

Must needed info and clarification. Thanks.

[@elche1387]

You provide great information and I thank you for that. I believe, your explanation would be more impactful if you use some visual aids.

[@John-cl2kr]

Clear at the beginning but getting confused at the end.😅

[@kwilliams2239]

Great stuff! My wife and I have been discussing this lately and it appears that we're both right. We're both retired and over 59.5 (over 70). I converted some of my IRA to a Roth two years ago, and hers last year. I said the five-year rule doesn't apply and she argued that it did. I was talking about the second rule, while she was talking about the first. She's right because we just opened the Roths. It's no problem because the Roths are the last dimes we intend to spend and the inheritance is uncomplicated (I intend to do more). Converting hers to a Roth also avoids the RMD on her IRA. Not that it really matters but hers is relatively small and mine is professionally managed, including planning. Considering inheritance, how does the five-year rule play there?

[@brianadams6204]

I Have a question ? My company recently switched to a new 401k company and I have $6900 in the old ROTH 401K can I roll that over to my ROTH IRA that I have at my bank?

[@longgone9738]

Roth funds can be directly transferred to a Roth UmIRA. Have your bank do the paperwork. Avoid “touching” the funds yourself.

[@william4202]

THANK YOU SO MUCH FOR THIS HELPFUL VIDEO!!!

[@ricklord8940]

When dollars are in funds/shares, that 15-20-25-35% income tax rate could challenge the Roth being a better option. Look at your tax brackets what rate you expect when retiring. You might be paying a higher rate now than in retirement. In my case traditional IRA/401k and maximizing shares purchased during my working years has more "shares/dollars" working for me. Just speaking about dollars vs the actual dollars in shares of a fund can be a missed opportunity when you have pretax dollars working for you for a longer period.

[@shredboise]

Excellent, to the point and clear. Thanks!

[@ahnonamos]

Super helpful. Thank you

[@pixelgirl3307]

Question: I withdrew a large sum from my IRA ( after withdrawing RMD) this February . I didn’t withhold any taxes at the time, can I pay the amount of taxes owed next year when I do my taxes or do I have to pay any amount sooner. I’m 75 .

[@pixelgirl3307]

I did a Roth conversion with that money.

[@micheleyoungblood]

You have to pay estimated taxes on your money as a senior. So when you do a Roth conversion you have to pay estimated taxes. But the IRS wants you to pay estimated taxes on an equal basis basically for the four quarters of the year. If you use the amount you paid in taxes for the previous year and use that amount quarterly paying your estimated taxes that's called safe harbor and your large conversion won't matter, because you're under safe harbor and your pain the IRS what you paid in last year's tax returns total taxes. Then when you file your tax return and you owe more money on the conversion you just pay the money with your tax return. If you're not paying estimated taxes you'll end up getting penalized when you pay your taxes with your tax return.

[@longgone9738]

If you wait to pay the taxes due when you file your tax return, the IRS will charge you an extra penalty for “underpayment” if you do not send in estimated tax payments each quarter.

[@dantheman6607]

Thank you very clear presentation

[@KevinKidwell-v3c]

I have a IRA question. My wife took out a distribution from her IRA in the calendar year she was 59.5 but the day she withdrew it out on the particular year of that same calendar year she was technically 59 and not reached the 59.5 until later that same year. Does the 10% tax penalty happen for that withdraw? She messed up but hopefully since she turned 59.5 that same calendar year, the penalty doesn't apply. Thanks for the response.

[@longgone9738]

She is subject to the 10% penalty because she took the withdrawal BEFORE she turned 59 & 1/2 years old.

[@cbbcbb6803]

To do a Roth conversion, do you have to have a W-2 job? Can you setup a Roth after retirement? After you retire, you no longer receive W-2 tax forms. Did I miss something?

[@everettcalhoun8197]

Not to do a conversion from a 401k or IRA. Contributions are a different story. You can do conversions but cannot do contributions unless you are not working.

[@longgone9738]

1) W-2 forms are NOT needed to do Roth conversions. 2) You can open a Roth IRA after retirement.

[@shanedavison7473]

I started a ROTH IRA in 2013. I put at least $25,000 into it over the years and now it is worth about $15,800. I don't seem to know how to manage the account. All I do is lose money.

[@everettcalhoun8197]

OUCH!

[@everettcalhoun8197]

Basic risk management tools may be in order.

[@billsmith2308]

IF I (+65 yo) have to make a mandatory distribution from my 401k (non-Roth), and if I deposit the distibution to my Roth (Established >5 years ago) will I avoid taxes on the distribution?

[@STF68]

No

[@ArtifactRescues]

You could rollover the non-roth to a Roth but you would need to pay taxes on the total amount of the rollover as if it is income. Then going forward there would be no required min distributions.

[@micheleyoungblood]

I don't believe you can use rmd money to convert to a Roth. I believe that money would have to be used or put into a brokerage account. After you take your rmd, if you are at the age that you must start doing that, and if you want to then do a Roth conversion, then you have to take more money out after the rmd and do the conversion of that money. Then you will pay taxes on the rmd amount and the amount you converted.

[@gregghunter1796]

Too many rules all designed to make things too complex to follow.

[@chrisg.b.2095]

The first 5 year is for contributions, He said do a small conversion, "even if its $100" to start the clock. This is incorrect. You need to contribute to a Roth to start the clock on the 1st 5 year rule.

[@Catherine_2571]

He said this in the context of someone who makes too much money to contribute (start) a Roth account. This is another way to start an account. He was correct in this.

[@mylinhp2004]

Thanks! 1. Open Roth IRA now for 5 yrs rule( holding Roth IRA does not qualify) 2. Roth conversion is taxable 3. Inherited Roth IRA- now you have 10 yrs after date of death to withdraw those Roth balance

[@reneebrown1655]

What do you mean holding roth ira does not qualify?

[@188jan]

Very informative thank you ❤

[@bradleygraves5915]

5 year rule is best mentioned as a 5-year clock. Track the timer.

[@kenmore1961]

So why would anyone over 59.5 (assuming they have had a ROTH account for 5 years) EVER take a 401K withdrawal and put it into a Brokerage account instead of doing a ROTH conversion? Sounds like you should never ever do that, but people do.

[@stephnejele2483]

RMD's can't be converted to Roth

[@kenmore1961]

@@stephnejele2483 I'm not talking about RMD's. I'm talking about a normal 401K distribution that is not an RMD.

[@beefcreeb96]

@@stephnejele2483 But the years between 59.5 and RMDs? Seems like the smart thing to do, though it also sounds too good to be true.

[@frankt1720]

Tax free growth is nice

[@billbrown4000]

Because of liquidity. You can have instant access to the cash in a brokerage acct. It can take a few days to access the cash in a Roth.

[@paragonknight3307]

Dumb question, once one reaches 59.5 years of age, can one simply continue to hold thier Roth IRA and withdrawal dividends every month?

[@micheleyoungblood]

You have to have had the Roth open for 5 years before drawing the dividends out. That's the first 5 year rule

[@paragonknight3307]

@@micheleyoungblood thanks, yeah i should definitely reach that 5 year rule, i started my roth 2 years ago when i was 28

[@everettcalhoun8197]

There are no dumb questions just dumb mistakes. Just sayin'

[@paragonknight3307]

@@everettcalhoun8197 Thanks 😊

[@gahoopertx]

Excellent tips!

[@bobb7918]

Great explanation

[@sandrahoward5512]

Thanks!

[@billdivine9501]

If I have $100k in cash to invest and I’m 60 years old, if I open a Roth I can only put $8k in it each year. That’s not much for growth. The rest of it would have to be invested in a taxable account where most of the money would be earned by growth and or dividends.

[@ericgold3840]

NIcely explained, and accurate

[@cayankeelord3730]

Question, I'm retiring soon as a 69 y.o. and already have a roth which has been opened for 10 years. I'm rolling over a $180,000 401k that was entirely employer funded to a self directed ira. I'm planning to open three additional roth's, as needed, and roll over the ira in equal third amounts, in three successive years into the separate roth's in order to keep the funds isolated from each other and make it simple to determine when the five year restriction has elapsed for each rollover. Does this make sense, or am I overthinking this? Once the five year rule has elapsed, I was going to move each one to my original Roth to consolidate my accounts.

[@touchofgrace3217]

I don’t think it matters. When you sell assets you can choose the first in, first out option

[@kenmore1961]

@@touchofgrace3217 In the video, he said that 2nd 5 year rule does not apply if you are over 59.5. However I have heard other 'experts' say the second 5 year rule still applies over 59.5... So who knows... Even if I asked a financial expert, I would not be comfortable with the answer they gave me no matter what they said. I have heard too many people give different answers.

[@mandypdx]

⁠@@kenmore1961he is correct in this video. It clearly states on irs.gov that “You have reached age 59½” is one of the exceptions to the 2nd 5-year rule :)

[@touchofgrace3217]

@@kenmore1961 he did get a little confusing with all of the imaginary scenarios instead of just clarifying the rules themselves. One 5yr rule is about the age of the Roth Account itself. The second 5yr rule is about each individual conversion of the funds into the Roth. Neither rule is affected by the age of the retiree.

[@johnscott2746]

At the IRS website there is a complete explanation along with a flowchart. What it comes down to is : If you have had ANY Roth IRA open for at least five years and you are over 59 and 1/2 then all distributions are qualified and tax free.

[@TeresaLiam-z1o]

Dealing in Roth IRA can be a good choice since they are funded with after tax dollars, your contributions can grow tax-free over time. When you withdraw money from your Roth IRA in retirement, you won’t have to pay tax on it, which will help you keep more of your hard-earned money.

[@MichelleBennett-g6d]

If you’re new too investing or have a more complex financial situation, It can be helpful to work with a financial advisor who can provide personalized guidance and help you make informed investment decisions.

[@BenJacques-h1x]

Due to the market falls, I need advice on how to rebuild my portfolio and develop more successful tactics. Where can I find this financial planner?

[@BenJacques-h1x]

Thank you for sharing, I must say, She appears to be quite knowledgeable. After coming across her web page, I went through her resume and it was quite impressive.

[@FreakyLynx]

I was under the impression you had to own the Roth account you’re withdrawing from for five years. If you owned one Roth 30 years and then open one when you’re 59… I’d think at 59.5 years you could only withdraw gains from the older one.

[@teamrecon2685]

That is not correct

[@everettcalhoun8197]

@@teamrecon2685 You are incorrect. Each and every Roth conversion has its own 5 year rule.

[@longgone9738]

The IRS treats multiple IRA accounts as a “single” event. Both 5-year rules magically “evaporate” provided: 1) at least ONE IRA account has been open for 5 years, and 2) the account owner is 59.5 years old (or older) when the distribution is taken out/received.

[@lilliankerr-z7c]

Investing in Roth IRA can be a good choice since they are funded with after tax dollars, your contributions can grow tax-free over time. When you withdraw money from your Roth IRA in retirement, you won’t have to pay tax on it, which will help you keep more of your hard-earned money.

[@LeylahCollins]

If you’re new too investing or have a more complex financial situation, It can be helpful to work with a financial advisor who can provide personalized guidance and help you make informed investment decisions.

[@MichelleBennett-g6d]

Due to the market falls, I need advice on how to rebuild my portfolio and develop more successful tactics. Where can I find this financial planner?

[@MichelleBennett-g6d]

Thank you for sharing, I must say, She appears to be quite knowledgeable. After coming across her web page, I went through her resume and it was quite impressive.

[@mikeflair6800]

Whoa very interesting. I did not know the ROTH '5 Year Rule' impacts, especially on conversions. IMO, just another reason to stick with traditional IRA, and leave the money intact and subject to compounding.

[@longgone9738]

Regular IRA = perpetual tax on the HARVEST. Roth IRA = tax on the SEED. But the perpetual HARVEST is tax-free forever. I know which account I choose.

[@winstonrosete8036]

I don't think there is a separate 5 yr rule for each conversion once you satisfy the first.

[@johnscott2746]

There is a separate 5 year rule for each conversion but once you turn 59 and 1/2 the rule goes away. The entire purpose of the rule is to keep people from doing an end run around the rules for traditional IRAs . Once you reach 59.5 there is no more 10% penalty so no more rule.

[@everettcalhoun8197]

@@johnscott2746 As far as the IRS each and every conversion to a Roth has a 5 year rule regardless of age.

[@johnscott2746]

@@everettcalhoun8197nope. On the IRS website their is a flowchart that shows how it works. If you are 59 and 1/2 and you have had ANY Roth IRA open for at least five years then all distributions are qualified and tax free. The whole purpose of the five year rule on conversions is to keep someone who is underage from converting the funds and then immediately withdrawing them with no penalty because the taxes have already been paid. I did a conversion when I retired at 61 in order to use it as an emergency fund and I have accessed it several times in the last four years. No problems with the IRS.

[@johnscott2746]

@@everettcalhoun8197nope. There is a flowchart on the IRS website that explains it very well. If you are over 59 and 1/2 and you’ve had ANY Roth IRA open for at least 5 years then all distributions are qualified and tax free.

[@youngboytam9510]

Make it short

[@lkd06]

the rules for this are way too complicated to make it short

[@micheleyoungblood]

If you want it short go to irs.gov and read it for yourself.

[@thonatim5321]

Jesus H Christ. It took 4:12 to answer the question. The answer Yes and NO.

[@DE-Burrows]

To achieve a secure retirement, aiming to save at least 15% of your income in a 401(k) is advisable. Online tools can assist in calculating the best savings strategy for you, considering factors like age and income. Consistently saving this percentage can help build your retirement fund effectively, thanks to the benefits of compound interest.

[@Pamcheryl]

With Roth IRA, the money you are contributing has already been taxed. At any time for any reason, you can withdraw your contributions tax-free and penalty-free. Additionally, any earnings on investments can also be withdrawn tax-free and penalty-free, Not sure how much to contribute, I'm still at a crossroads deciding if to liquidate my $338k stock portfolio.

[@BEAUTIFULDIANAFRANCIS]

For me, I believe retirees who struggle to meet their basic needs are the ones who could not accumulate enough money during their active years to meet their needs. Retirement choices determine a lot of things. My wife and I both spent same number of years in the civil service, she invested through a wealth manager and myself through the 401k. We both still earning after our retirement.

[@LeslieWagenheim]

For the average person, the strategies are fairly demanding. In actuality, most professionals who have the necessary abilities and knowledge to complete such occupations do so successfully.

[@MarcelinaMakowski]

I agree, that's the more reason I prefer my day to day investment decisions being guided by an advisor, seeing that their entire skillset is built around going long and short at the same time both employing risk for its asymmetrical upside and laying off risk as a hedge against the inevitable downward turns, coupled with the exclusive information/analysis they have, it's near impossible to not out-perform, been using my advisor for over 2years+ and I've netted over 2.8million.

[@ChrisDERUNNER]

@@MarcelinaMakowski How can I reach this adviser of yours? because I'm seeking for a more effective investment approach on my savings?

[@lilblackduc7312]

Your shows should be 'required viewing' in schools.

[@joekuul8769]

Very helpful, thank you!