Core Points - The article discusses the complexities of the five-year rules related to Roth IRA conversions and withdrawals, emphasizing the importance of understanding these rules to avoid unexpected taxes and penalties [4][17][21] Group 1: First Five-Year Rule - The first five-year rule applies to Roth IRA contributions and requires account owners to wait at least five tax years from their first contribution to withdraw earnings tax-free, provided they are at least 59 ½ years old [3][17] - If subsequent contributions or new Roth accounts are opened, the five-year clock does not restart [3][7] - The first five-year rule is relevant when determining tax implications on earnings withdrawn before the five-year period ends, even if the account owner is over 59 ½ years old [11][15] Group 2: Second Five-Year Rule - The second five-year rule pertains to Roth conversions and states that if a distribution is taken before age 59 ½, it will be subject to a 10% early withdrawal penalty [2][18] - For individuals over 59 ½, the second rule allows for the withdrawal of converted principal without a penalty, but any earnings withdrawn before the five-year period will be taxed [11][18] - Each Roth conversion has its own five-year clock that starts on January 1 of the year the conversion is completed [7][18] Group 3: Withdrawal Scenarios - Various scenarios illustrate the application of the five-year rules, such as withdrawing only principal without penalties or taxes if no earnings have been generated [13][14] - If earnings have been generated and the account owner wishes to withdraw the total account value before the five-year period, taxes will apply to the earnings portion [15] - Key questions to consider when planning withdrawals include the timing of the initial funding, whether the account has generated earnings, and the amount intended for withdrawal [16]