Roth IRA Tax-Free Withdrawals: 5-Year Rule Explained

12/05/23 • 19 min

James explores the nuanced aspects of Roth IRAs, shedding light on intricacies that can confound even experienced investors.
Through a listener question from Manfred, a retiree contemplating a $50,000 conversion from a 401k to a Roth account, James dissects the crucial five-year holding period and the order in which contributions, conversions, and earnings are treated during withdrawals.
James also provides clarity on distribution rules, exceptions, and strategic considerations, offering a comprehensive guide to navigating the complexities of Roth IRAs for optimal retirement planning.
Questions Answered:
How does the timing of subsequent conversions impact the application of the five-year rule?
In Roth IRA withdrawals, what is the specific order of operations, and what implications does that have?
Timestamps:
0:00 Manfred’s question
1:39 Get the cheatsheet
2:37 Understanding source nuances
7:01 The five-year rule
8:37 IRS’s order of operations
11:59 Exceptions to the rule
13:49 Only a small impediment
16:14 Back to Manfred’s example

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12/05/23 • 19 min

2 Listeners

Ready For Retirement - Roth IRA Tax-Free Withdrawals: 5-Year Rule Explained

Transcript

Speaker 100:00:00.161

Roth IRAs can be a powerful tool for retirement savings , but there's some tricky things about them that can also be quite difficult to understand . In today's episode of Ready for Retirement , we're going to go over some of these lesser known aspects of Roth IRAs , some of these tricks , so that you know what to avoid and how to make the most of these in your Roth IRA strategy

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