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Roth conversion at 66 can backfire on the five-year rule

Original: Open Your First Roth at 66 With a $200,000 Conversion and Empty It at 70, and the $43,000 of Growth Is Taxable, Because the Account Is a Year Short of Five

A personal finance warning is making the rounds: someone who opens their first Roth IRA at 66 and converts $200,000, then withdraws everything at 70, could owe tax on roughly $43,000 of growth. The reason is the five-year rule on conversions — withdrawing converted funds within five years of the conversion means earnings may be taxable, even after age 59½. Commentators urge retirees to check conversion timing before touching Roth money.

Why now: The counterintuitive tax penalty traps near-retirees who assume Roth withdrawals are always tax-free after 59½.

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• Open Your First Roth at 66 With a $200,000 Conversion and Empty It at 70, and the $43,000 of Growth Is Taxable, Because the Account Is a Year Short of Five · 24/7 Wall St.

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