WCI #146: The 5-Year Rule for Roth IRA Conversions
White Coat Investor Podcast
Dr. Jim Dahle of the White Coat Investor
4.9 • 2.3K Ratings
🗓️ 20 February 2020
⏱️ 47 minutes
🧾️ Download transcript
Summary
The 5-year rule for Roth IRA Conversions can be confusing because there are two 5-year rules regarding Roth IRAs. We discuss the difference between them in this episode. See the full show notes here https://www.whitecoatinvestor.com/classic-blog/ . The first five year rule applies to Roth IRA contributions and determines whether the earnings will be tax free. The second rule applies to Roth conversions and applies to whether or not the principal that was converted will be penalty free when it comes out. In the case of conversions each conversion amount actually has its own five year time period. With multiple conversions, there may be multiple different five year periods underway at once. When withdrawals occur from the conversion amounts, they're deemed to come out on a first in first out basis, so that means that the oldest conversions, the ones most likely to have finished their five year requirement, come out first, and the most recent conversions come out last. We discuss in this episode why the rule is set up this way and how it will affect your retirement planning. We also answer listener questions about Roth vs Traditional 401(k) contributions, employers contributing to a different HSA for you, buying into a practice and losing your solo 401(k), defined benefit plans, how much cash to keep on hand, NNN properties, and why every solo 401k or SEP IRA isn't self-directed?
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Transcript
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| 0:00.0 | This is the White Coat Investor Podcast, where we help those who wear the white coat get a fair shake on Wall Street. |
| 0:06.0 | We've been helping doctors and other high-income professionals stop doing dumb things with their money since 2011. |
| 0:12.0 | Here is your host, Dr. Jim Dolly. |
| 0:15.0 | This is White Coat Investor, |
| 0:19.0 | Podcast number 146, the five-year rule for Roth conversions. |
| 0:23.7 | Welcome back to the podcast. |
| 0:25.4 | Hopefully we're giving you some useful information here, common sense stuff, a lot of |
| 0:30.1 | it, but sometimes we really get into the weeds when it comes to financial matters. |
| 0:34.0 | If you feel like we're getting out there in the weeds a little bit too much, just give us a couple of minutes and |
| 0:38.0 | we'll get back to the basics. |
| 0:39.4 | We don't spend too much time talking about that sort of stuff. We try to focus on the real issues |
| 0:44.7 | that real doctors and other high-income professionals are dealing with. |
| 0:48.0 | The Whitecone investor is proud to introduce our no-hype real estate investing |
| 0:52.4 | course which will provide the framework for developing further knowledge and experiences you progress in your real estate investing career. |
| 0:59.0 | We call it an introductory course because there's always more to learn. But this is no short superficial course. |
| 1:04.0 | There are over 200 lectures and videos |
| 1:06.0 | adding up to more than 27 hours of content |
| 1:08.0 | by over 15 different instructors. |
| 1:10.0 | We think it just might be the best real estate course on the planet. |
| 1:13.4 | Continue your wealth building journey today with the no-hipe real estate investing |
| 1:17.4 | course at whitecoat investor.com slash courses. You can do this |
| 1:21.3 | and the white code investor can help. |
... |
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