This is very helpful information. We were just discussing this very topic two days ago so this has cleared up our confusion now that we have heard it AND seen it explained so well. Thank you!
Once the money is withdrawn from a Roth IRA, do you suggest having a Roth savings or checking account as opposed to a normal taxable savings or checking account to park the money until you need to use the funds? If not, the funds will be taxed (although should be minor) at this point and break the tax free benefits of the Roth.
If you've made yearly Roth IRA contributions for many years, then prior to reaching age 59 1/2, you decide to take a distribution that is perhaps half of your total yearly contributions, say 30k, when tax time comes do you have to itemize the breakdown of what years contributions made up the 30k? Or does the IRS know that over the years you contributed 60k, so they don't need a detailed accounting for the 30k distribution?
I'm 61, started my first conversions from my IRA a few months ago, and will continue to do this yearly. Does each conversion start a 5 year clock for my earnings to be tax free?
The 5 year rule starts at the time of the first Roth deposit. All other deposits are time based on the first deposit date. Hans and Tom do a great job explaining it.
@@vanbrendle I’m not asking about deposits (contributions), I asking about IRA conversions. Each conversion starts a new 5 year rule. I just don’t know if that rule applies after 59 1/2.
5 year rule “clock” starts the date in time you open your first Roth IRA account. Later conversions use the original clock. There is a chart explaining this in the show notes for this episode. Thanks for watching and commenting Hans
@@CardinalAdvisors Thanks but I believe this still does not address the question about if the 5-year clock for each conversion (not the one for a first opening Roth deposit) applies to withdrawals after 59 1/2 of EARNINGS from those conversions. So, assuming I already have a Roth IRA open with $1 for more than 5 years, if I then convert $100k from my IRA to that Roth IRA at age 61 and it grows to $120k by age 62, can I withdraw the full $120k at age 62 without paying any taxes or penalty on that $20k of earnings?
For joint taxpayers, they don't combine you and your spouses ROTH ira into a single bucket, right? What type of information to IRA custodians like brokers actually give the IRS? Do they give the information on what yr a conversion was made and how much of the account is earnings?.. I would like to see the actual tax form you fill out for your return to the IRS.
PLZ clarify this.. I believe its an error.. Conversions are taxable event and trigger IRMAA, BUT a distribution(, say years later where there is no penalty or tax) is NOT income for IRMAA purpose...
@@pauld9653 I agree with you. A Roth qualified ‘distribution’ should not have any effect in the MAGI used for IRMAA. Qualified distributions are not included in MAGI.
I'm converting to Roth every year, but limit myself as to how much based on staying in the 24% tax bracket. I don't want to exceed that percent to keep my IRMAA at the same level. I do realize the tax law's are changing in 2025. So at that time, I may need to convert less.
This is very helpful information. We were just discussing this very topic two days ago so this has cleared up our confusion now that we have heard it AND seen it explained so well. Thank you!
Yeah, it's a big change going from socking it away to starting to use it! Thanks for your useful and interesting videos.
Thank you for clearing up details on Roth 5 year lifetime rules
Once the money is withdrawn from a Roth IRA, do you suggest having a Roth savings or checking account as opposed to a normal taxable savings or checking account to park the money until you need to use the funds? If not, the funds will be taxed (although should be minor) at this point and break the tax free benefits of the Roth.
I’m showing you how and when you can withdraw from the Roth tax free. I recommend leaving it in the Roth until you need it to spend and enjoy.
If you've made yearly Roth IRA contributions for many years, then prior to reaching age 59 1/2, you decide to take a distribution that is perhaps half of your total yearly contributions, say 30k, when tax time comes do you have to itemize the breakdown of what years contributions made up the 30k? Or does the IRS know that over the years you contributed 60k, so they don't need a detailed accounting for the 30k distribution?
I'm 61, started my first conversions from my IRA a few months ago, and will continue to do this yearly. Does each conversion start a 5 year clock for my earnings to be tax free?
The 5 year rule starts at the time of the first Roth deposit. All other deposits are time based on the first deposit date. Hans and Tom do a great job explaining it.
@@vanbrendle I’m not asking about deposits (contributions), I asking about IRA conversions. Each conversion starts a new 5 year rule. I just don’t know if that rule applies after 59 1/2.
5 year rule “clock” starts the date in time you open your first Roth IRA account. Later conversions use the original clock. There is a chart explaining this in the show notes for this episode. Thanks for watching and commenting Hans
@@CardinalAdvisors Thank you.
@@CardinalAdvisors Thanks but I believe this still does not address the question about if the 5-year clock for each conversion (not the one for a first opening Roth deposit) applies to withdrawals after 59 1/2 of EARNINGS from those conversions. So, assuming I already have a Roth IRA open with $1 for more than 5 years, if I then convert $100k from my IRA to that Roth IRA at age 61 and it grows to $120k by age 62, can I withdraw the full $120k at age 62 without paying any taxes or penalty on that $20k of earnings?
For joint taxpayers, they don't combine you and your spouses ROTH ira into a single bucket, right?
What type of information to IRA custodians like brokers actually give the IRS? Do they give the information on what yr a conversion was made and how much of the account is earnings?.. I would like to see the actual tax form you fill out for your return to the IRS.
Great video. Do Roth IRA distributions add to the Modified Adjusted Gross Income for IRMAA purposes?
Yes they count for IRMAA
PLZ clarify this.. I believe its an error.. Conversions are taxable event and trigger IRMAA, BUT a distribution(, say years later where there is no penalty or tax) is
NOT income for IRMAA purpose...
@@pauld9653 I agree with you. A Roth qualified ‘distribution’ should not have any effect in the MAGI used for IRMAA. Qualified distributions are not included in MAGI.
I'm converting to Roth every year, but limit myself as to how much based on staying in the 24% tax bracket. I don't want to exceed that percent to keep my IRMAA at the same level. I do realize the tax law's are changing in 2025. So at that time, I may need to convert less.