17 Jan I converted to a Roth IRA. When can I take out the cash?

Q. I opened a new Roth IRA account six years ago by converting some of my IRA funds and have converted some more into the same Roth account every year since. Am I allowed to withdraw money that was converted three years ago because the account was created at least five years ago or do I have to wait two more years for when it turns five years?
— Investor

A. Qualified distributions received from a Roth IRA are not includible in income, said said Neil Becourtney, a certified public accountant and tax director with Smolin, Lupin & Co. in Red Bank.

He said to be a qualified distribution, you must meet two requirements.

First, the distribution must be made “after the 5-year period beginning with the first tax year for which a contribution was made to a Roth IRA,” Becourtney said.

It also must be made on or after attaining age 59 ½, made to a disabled account owner, made to a beneficiary or your estate after death, or used to purchase a first home (with additional requirements) but not to exceed $10,000, he said.

Becourtney said you meet the first test by having opened your Roth IRA six years ago.

“We do not have enough facts to know whether you meet any of the requirements of the second test aside from you thankfully flunking the test involving death,” he said.

He also noted there is no need to separately track your yearly additions (conversions) to the Roth IRA for purposes of determining whether you meet the qualified distributions definition, he said.

Distributions from Roth IRAs are covered in detail in IRS Pub. 590-B, Distributions from Individual Retirement Arrangements (IRAs).

New Jersey likewise does not tax qualified distributions from a Roth IRA, he said.

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This story was originally published in January 2024.

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