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No penalties but I'm still not completely convinced that each conversion doesn't have it's own 5 year waiting period for qualified distributions of earnings.

I'm confused as to why you think that, in an IRA, earnings for conversions have their own 5-year waiting period to be qualified. Earnings from conversions are treated the same as any other earnings in the Roth IRA and will be subject to taxes and penalties if the distribution is not qualified. Waiting 5 years after the conversion does not make a distribution of the earnings from a conversion qualified, or exempt the distribution from penalties and taxes, as appropriate. The only way that a distribution of any earnings from a Roth IRA will not be subject to taxes and penalties is if the distribution is a qualified distribution. Per IRS Pub 590-B https://www.irs.gov/pub/irs-pdf/p590b.pdf

What Are Qualified Distributions?

A qualified distribution is any payment or distribution from your Roth IRA that meets the following requirements.

1. It is made after the 5-year period beginning with the first tax year for which a contribution was made to a Roth IRA set up for your benefit.

2. The payment or distribution is:
a. Made on or after the date you reach age 591/2,
b. Made because you are disabled (defined earlier),
c. Made to a beneficiary or to your estate after your death, or
d. One that meets the requirements listed under First home under Exceptions in chapter 1 (up to a $10,000 lifetime limit).


AJ
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