I've been helping my father move around funds now that he is retired. He is currently 68 and we are just looking at ROTH conversions to get away from RMD and etc.
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The penalty is 10% extra fee on the amount you withdraw from that account right, not the whole account? like if i took out 10k out of 40k, taxes only on the 10k.
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Even if he is older than 60, does he need the account or the funds to be in there for longer then 5 years? Also how do you prove it?
When he retired from his company, we rolled everything over to Fidelity. He now has a Traditional IRA and a ROTH IRA. I assume he had these 401k/Roth 401k accounts for 20+ years and it was just converted over. I believe the Fidelity accounts have been opened for 3 years now since i can look back to Sept 2023.
He intherited a small amount $40k IRA from my mom's passing. This account is thru Vangaurd. It was easier to have him open an account and they just changed owners. Now those funds are what we are targeting to do a Roth conversion. We want to do the full 40k for 2026, he didn't take any withdrawals out this year so we shouldn't go over any IRMAA stuff. All he has is his SS funds(30K) and this 40k.
If i understand correctly, this ROTH conversion with Vangaurd. This funds cant be touched for the first 5 years. Or does our existing ROTH with Fidelity start the clock and we only have 2 years to wait for the vanguard fund.
the 5 year roth rule for seniors, how do you prove it?
byu/lobstar28 inpersonalfinance
Posted by lobstar28
2 Comments
There are no penalties on the conversion itself
The 5-year rule for Roth conversions requires that you wait five years from the beginning of the tax year in which you made the conversion before you can withdraw the converted funds penalty-free. https://www.fidelity.com/learning-center/personal-finance/retirement/roth-ira-5-year-rule
You can’t do Roth conversions on inherited IRA (unless you are the surviving spouse), but you can from your own IRA/401k in the same amounts. https://www.forbes.com/sites/davidrae/2024/07/16/can-you-convert-an-inherited-ira-to-a-roth-ira/ , so it depends if he’s the surviving spouse at the time of death
Has he ever contributed to Roth IRA before 2023 in his entire lifetime?
Also the 5-year rule for conversions goes away after age 59.5. Because it is rooted in Traditional IRA’s 10% penalty.