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Greetings, Dhartung, and welcome. You asked:

<<I had been thinking about the $10,000 for first-time home buyers withdrawal loophole.

The legal phrasing I keep seeing is "at least five years", but I can't tell how that applies. Does the IRA itself have to have been open for five years, or is the money itself supposed to be in there that long? And does the clock start ticking from the moment it was established as a conventional IRA, or only when it's been converted to a Roth?

My hope is that I can do this in 2.5 years, but if I can't, it's useless to me. (I'm not waiting five years to buy a home!)>>

A Roth IRA has a different withdrawal order than does a traditional IRA, and the five tax-year rule applies only to the distribution of earnings or conversion contributions. The first money out of a Roth is applied to your annual contributions. Those may be taken at any time free of tax or penalty. Additionally, those withdrawals do not apply to or count against the $10K lifetime exception for an early IRA distribution for a home purchase. The next money out is conversion contributions starting from the oldest to the youngest. That money must be in the account for five tax-years to escape the 10% early withdrawal penalty. Conversion contribution money also does not apply to or count against the $10K lifetime exception. The last money out is earnings. To escape the 10% penalty and income tax, the account must be open for five tax-years or longer and you must be age 59 1/2 or use one of the qualified early withdrawal exceptions. Use of earnings for the purchase of a first home is one of those exceptions.

If you intend to use conversion money and/or earnings, then you must wait the five tax-years before doing so to buy your home.

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