By Ian Berger, JD
IRA Analyst
Question:
Greetings,
In 2025, I converted a traditional IRA to an existing Roth IRA, which I have held for 20 years. I will turn age 60 in 2026. Can I withdraw the converted money from my Roth IRA penalty free? Or do I have to wait five years?
I am so confused about this. Thanks for any information.
Chris
Answer:
Hi Chris,
Don’t feel bad; this is one of the most confusing retirement account rules. The bottom line is that if you wait until age 59½, the withdrawal of your converted amounts (and earnings) will be completely penalty-free. You wouldn’t have to worry about a five-year clock because that clock only applies to withdrawals of conversions before age 59½. If you can’t wait until age 59½, you may be able to avoid a penalty on all or part of the withdrawal because IRS ordering rules would allow you to treat at least part of it as a withdrawal of the contributions you have made to your Roth IRA (instead of a withdrawal of conversions). This would be an advantage because withdrawals of Roth IRA contributions are always penalty-free at any age. But these rules are REALLY complicated. So, better off waiting until age 59½.
Question:
My client is age 75. He retired on January 1, 2025. The company has recognized his retirement date as being January 1, 2025. When must he take his first required minimum distribution (RMD) from the company plan?
Rick
Answer:
Hi Rick,
If your client legitimately retired on January 1, 2025, then his first RMD year for the plan is 2025. He may be able to defer his 2025 RMD until April 1, 2026, but that would require him to take two RMDs in 2026 – the 2025 RMD by April 1, 2026 and the 2026 RMD by December 31, 2026. However, if the client does a rollover of his plan funds in 2025, he can’t defer the 2025 RMD until April 1, 2026. Instead, he must first take that RMD before doing the rollover.
If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.