Roth Five-Year Rule

Retirement

The Roth Five-Year Rule has two flavors. (1) For Roth IRA contributions: earnings can be withdrawn tax-free only after both reaching age 59½ AND having a Roth IRA open for 5 years. (2) For Roth conversions: each conversion has its own 5-year clock for penalty-free withdrawal of the converted amount before age 59½. The 5-year clock starts January 1 of the year of contribution or conversion, regardless of actual date. Strategy: open a Roth IRA early (even with a small contribution) to start the clock. Important for early retirees planning Roth conversion ladders to fund pre-59½ years.