What is the 5-Year Rule related to Roth IRAs?

Roth IRAs have a 5-Year Rule. The 5-Year Rule begins on the first tax year for which a contribution was made into the Roth IRA. While Roth IRA contributions can be withdrawn tax-free at any time, the earnings in the account must be maintained until you're 59 and 1/2 years old to qualify for a tax-free distribution.

For example, if you are transferring in a current Roth IRA that you have had with your current custodian for two years, you would only have to hold it for three more years at iTrustCapital AND be 59 and 1/2 years old to take a qualified distribution. In another case, the 5-Year Rule would still be relevant if someone was 57 years old and never established a Roth IRA. This person would have to wait until they were 62 to withdraw their earnings tax-free.

For more information, feel free to visit the IRS website.

** Disclaimer - This article is for informational purposes only and does not constitute financial advice. Please consult with your tax or financial professional before proceeding with a distribution to assess suitability.