I Want to Convert $900k to a Roth Before RMDs Start. Do I Have to Wait 5 Years to Access It?

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People with Roth IRAs generally have to wait five years before withdrawing earnings from their account.

But the devil is in the details, and for this particular rule, getting those details can be surprisingly difficult. For starters, the IRS has three different five-year rules that apply to Roth IRAs. One of them, the conversion rule, appears self-contradictory. The IRS doesn't publish clear instructions on these rules. And each outlet writing about this subject appears to give slightly different information.

In other words, don't blame yourself if you're confused. This one is very confusing, which is why working with a financial advisor who understands the ins and outs of the IRS rules can be so helpful. Connect with a fiduciary advisor today .

For example, say you're 70 years old and your required minimum distributions (RMDs) will start in three years. You'd like to avoid RMDs by converting your $900,000 pre-tax savings into a Roth IRA. How will the five-year rule apply?

There are three different versions of the five-year rule, each based on how you fund or receive your Roth portfolio.

This version applies to earnings from contributions, meaning earned income subject to the annual IRA contribution limit. You must wait five years from when you first fund a Roth account before taking distributions from any Roth portfolio. This is a one-time rule, meaning that it does not reset for any future contributions after your first.

This version applies to converted balances, meaning assets transferred from a pre-tax portfolio. After you make a conversion, you must wait five years before taking distributions from the converted funds. However, this rule doesn't apply to people ages 59 ½ and older.