A:

First, some background information: the tax treatment of a Roth IRA distribution depends on whether or not the distribution is qualified. Qualified distributions from Roth IRAs are tax and penalty free, but non-qualified distributions may be subjected to tax and an early-distribution penalty. Generally, for a distribution to be qualified, it must occur at least five years after the Roth IRA owner established and funded his/her first Roth IRA - this is the five-year rule to which you refer.

In your case, you may withdraw any amount from the principal balance at any time, and the amount will be tax and penalty free. Only the earnings are subject to the five-year holding period because you are at least 59.5 years old.

Note: Please make sure that you distribute your required minimum distribution (RMD) for the year before you convert the amount to the Roth IRA. RMD amounts cannot be converted to a Roth IRA and must be distributed before the conversion. Otherwise, the RMD amount will be considered an ineligible conversion.

To learn more, read Avoiding RMD Pitfalls,'Tis The Season For Required Minimum Distributions, Preparing For The RMD Season - Part 1 and Preparing For The RMD Season - Part 2.

This question was answered by Denise Appleby
(Contact Denise)

RELATED FAQS
  1. What are the best ways to sell an annuity?

    The best ways to sell an annuity are to locate buyers from insurance agents or companies that specialize in connecting buyers ... Read Full Answer >>
  2. Can you buy penny stocks in an IRA?

    It is possible to trade penny stocks through an individual retirement accounts, or IRA. However, penny stocks are generally ... Read Full Answer >>
  3. Can I use my IRA to pay for my college loans?

    If you are older than 59.5 and have been contributing to your IRA for more than five years, you may withdraw funds to pay ... Read Full Answer >>
  4. Can my IRA be used for college tuition?

    You can use your IRA to pay for college tuition even before you reach retirement age. In fact, your retirement savings can ... Read Full Answer >>
  5. Why are IRA, Roth IRAs and 401(k) contributions limited?

    Contributions to IRA, Roth IRA, 401(k) and other retirement savings plans are limited by the IRS to prevent the very wealthy ... Read Full Answer >>
  6. How do you calculate penalties on an IRA or Roth IRA early withdrawal?

    With a few exceptions, early withdrawals from traditional or Roth IRAs generally incur a tax penalty equal to 10% of the ... Read Full Answer >>
Related Articles
  1. Professionals

    How to Protect Elderly Clients from Predators

    Advisors dealing with older clients face a specific set of difficulties. Here's how to help protect them.
  2. Professionals

    Social Security 'Start, Stop, Start' Explained

    The start, stop, start Social Security strategy is complicated. Here's what retirees considering it need to consider.
  3. Retirement

    Strategies for a Worry-Free Retirement

    Worried about retirement? Here are several strategies to greatly reduce the chance your nest egg will end up depleted.
  4. Professionals

    Your 401(k): How to Handle Market Volatility

    An in-depth look at how manage to 401(k) assets during times of market volatility.
  5. Professionals

    How to Build a Financial Plan for Gen X, Y Clients

    Retirement is creeping closer for clients in their 30s and 40s. It's a great segment for financial advisors to tap to build long-term client relationships.
  6. Professionals

    Don't Let Your Portfolio Be Trump'd by Illiquidity

    A look at Donald Trump's statement of finances and the biggest lesson every investor can learn.
  7. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  8. Retirement

    Maxing Out Your 401(k) Is Profitable: Here's Why

    It's shocking, but most American workers (73%) have no 401(k) retirement funds. Start saving now to anchor your retirement.
  9. Professionals

    Top Questions to Ask When Choosing a Robo-Advisor

    Think a robo-advisor might be the right choice for you? Be sure to ask these questions first.
  10. Professionals

    Top Retirement Hack? Start with a Lifestyle Change

    Instead of going through the usual retirement planning steps, some people are focusing on fostering a lower cost lifestyle from the start.
RELATED TERMS
  1. Proprietary Reverse Mortgage

    A loan that lets senior homeowners retrieve the equity in their ...
  2. Single-Purpose Reverse Mortgage

    A financial tool that lets senior homeowners retrieve some of ...
  3. Qualified Longevity Annuity Contract

    A Qualified Longevity Annuity Contract (QLAC) is a deferred annuity ...
  4. See-Through Trust

    A trust that is treated as the beneficiary of an individual retirement ...
  5. Backdoor Roth IRA

    A method that taxpayers can use to place retirement savings in ...
  6. Current Service Benefit

    The amount of pension benefit accrued by an employee who had ...

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!