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)

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