What is the 5-year rule for IRA Conversion?

The 5‑year rule says each Roth conversion gets its own 5‑year clock. The clock starts on January 1 of the year you do the conversion, not on the exact conversion date. If you are under 59½ and you withdraw converted amounts before five years have passed, you can owe a 10% early‑withdrawal penalty on that part, even though you already paid income tax when you converted. This rule is separate from the 5‑year rule for Roth earnings. Once you are at least 59½ and your first Roth IRA has been open for five years, most withdrawals of both contributions and earnings are usually tax‑ and penalty‑free.

Learn more about IRA conversion appraisals.