Ask an Advisor: My RMDs Are Near, So I'm Converting $700K to a Roth to Avoid Them. Do I Have to Wait to Access the Money Then?

Brandon Renfro, CFP®

Sat, Mar 8, 2025, 7:30 AM 7 min read

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I’m 68 and precocious retired and person astir $1.4 cardinal successful accounts intended for status ($1.2 cardinal successful a Traditional IRA and $110K successful a Roth). I besides americium receiving astir $47,000 annually successful Social Security benefits. My RMDs are scheduled to commencement successful 2027, and arsenic a result, my fiscal advisor and I are considering doing immoderate yearly Roth conversions anterior to 2027. It each sounds similar a bully program to me, however, I americium getting immoderate conflicting accusation connected erstwhile I volition beryllium capable to marque withdrawals from the Roth.

My advisor says I volition person to hold the modular 5 years aft each Roth conversion deposit earlier being capable to marque immoderate withdrawal of those funds (the conversion magnitude itself and immoderate earnings). However, I person besides been told I could retreat against the conversion magnitude with nary waiting play since I americium older than 59 ½. For example, my Roth was established successful 2015 and has had a full of $60,000 successful contributions and $50,000 successful earnings. If I were to bash a Roth conversion of $75,000 successful 2024 would I past person disposable $135,000 for withdrawal without immoderate penalty? My advisor says I would lone person the archetypal $60,000 disposable for withdrawal until the 5 years person passed for the conversion made successful 2024. What is the due withdrawal regularisation and rules nether those circumstances?

 – Jeff

Hey Jeff, large question. This is unluckily a precise confusing taxable that is easy jumbled up. It is not astonishing that you’ve received oregon recovered conflicting information. Fortunately, erstwhile you benignant done the rules and are capable to support them straight, the reply is precise clear.

Because you are implicit 59 ½ and person had a Roth IRA for 5 years, you tin retreat immoderate magnitude of wealth astatine immoderate clip from immoderate Roth IRA equilibrium you person (conversion oregon otherwise) without incurring a taxation liability oregon penalty. Period.

Having said that, I americium present conscionable different feline that has fixed you accusation that conflicts with thing other you’ve heard, right? Rather than leaving it astatine that, let’s locomotion done the rules and notation the circumstantial accusation from the IRS. (And if you’re request fiscal proposal oregon privation to find a caller advisor to enactment with, this escaped tool tin assistance you link with fiscal advisors who service your area.)

While Roth IRAs are funded with after-tax wealth that tin beryllium withdrawn tax-free, determination are circumstantial rules surrounding however to instrumentality this wealth retired of your account.

The IRS has 3 “five-year rules” for antithetic types of Roth IRAs, but we’ll beryllium discussing 2 of them here. The archetypal five-year regularisation specifically applies to accounts that commencement disconnected arsenic Roth IRAs, portion a abstracted five-year regularisation solely applies to accounts that are converted into Roth IRAs. Keep successful caput that moving afoul of either regularisation tin trigger a 10% aboriginal withdrawal penalty and/or income taxes connected concern earnings. You’ll evidently privation to debar these taxes and penalties arsenic champion arsenic you can.