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Roth IRA conversion five year rule can affect access before withdrawals
For a $900,000 conversion planned to avoid RMDs, the conversion-based five year clock generally runs from the Jan. 1 of the conversion year, but it does not apply to people 59 ½ and older.
Yahoo Finance, via SmartAsset, outlines how the Roth IRA five year rule can work differently depending on how the Roth account balance is funded, noting that the IRS applies multiple five year tests.
For Roth contributions, it generally requires waiting five years from when the account is first funded before taking distributions of earnings, and that clock is described as one-time. The conversion version requires a five year wait for distributions of converted balances, but the article says this conversion rule does not apply to people ages 59 ½ and older.
The guidance also explains that the conversion clock is tracked independently for each conversion, starting on Jan. 1 of the year the conversion is made. It gives an example of a Roth conversion dated July 15, 2023, with the five year period running from Jan. 1, 2023 to Jan. 1, 2028.
The article frames the issue as complex because it says the IRS has three different five-year rules for Roth IRAs and does not publish clear instructions, adding that information across outlets can differ.