A database with the personal information of over 5 million Salvadorans was recently leaked in a data breach forum. The database, which has been around since August and has recently been linked to Chivo, El Salvador’s national cryptocurrency wallet, has 144GB of data, including the full name, unique identity number, date of birth, address, and […]
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My RMDs Start Soon So I’m Converting $700k to a Roth, But I’m Getting Conflicting Info About Having to Wait Five Years

I’m 68 and recently retired and have about $1.4 million in accounts intended for retirement ($1.2 million in a Traditional IRA and $110K in a Roth). I also am receiving about $47,000 annually in Social Security benefits. My RMDs are scheduled to start in 2027, and as a result, my financial advisor and I are considering doing some annual Roth conversions prior to 2027. It all sounds like a good plan to me, however, I am getting some conflicting information on when I will be able to make withdrawals from the Roth.
My advisor says I will have to wait the standard five years after each Roth conversion deposit before being able to make any withdrawal of those funds (the conversion amount itself and any earnings). However, I have also been told I could withdraw against the conversion amount with no waiting period since I am older than 59 ½. For example, my Roth was established in 2015 and has had a total of $60,000 in contributions and $50,000 in earnings. If I were to do a Roth conversion of $75,000 in 2024 would I then have available $135,000 for withdrawal without any penalty? My advisor says I would only have the original $60,000 available for withdrawal until the five years have passed for the conversion made in 2024. What is the proper withdrawal regulation and rules under those circumstances?
– Jeff
Hey Jeff, great question. This is unfortunately a very confusing topic that is easily jumbled up. It is not surprising that you’ve received or found conflicting information. Fortunately, once you sort through the rules and are able to keep them straight, the answer is very clear.
Because you are over 59 ½ and have had a Roth IRA for five years, you can withdraw any amount of money at any time from any Roth IRA balance you have (conversion or otherwise) without incurring a tax liability or penalty. Period.
Having said that, I am now just another guy that has given you information that conflicts with something else you’ve heard, right? Rather than leaving it at that, let’s walk through the rules and reference the specific information from the IRS. (And if you’re need financial advice or want to find a new advisor to work with, this free tool can help you connect with financial advisors who serve your area.)
What Are the 5-Year Rules?
While Roth IRAs are funded with after-tax money that can be withdrawn tax-free, there are specific rules surrounding how to take this money out of your account.
The IRS has three “five-year rules” for different types of Roth IRAs, but we’ll be discussing two of them here. The first five-year rule specifically applies to accounts that start off as Roth IRAs, while a separate five-year rule solely applies to accounts that are converted into Roth IRAs. Keep in mind that running afoul of either rule can trigger a 10% early withdrawal penalty and/or income taxes on investment earnings. You’ll obviously want to avoid these taxes and penalties as best as you can.
5-Year Rule for Roth IRAs

The first five-year rule dictates that you must wait five years after your initial contribution to a Roth IRA before you can make tax-free withdrawals of any investment earnings. However, the five-year period is retroactive to Jan. 1 of the year in which your first contributions were made.
For example, if you made your first contribution to a Roth IRA in November 2020, the five-year period officially began on Jan. 1, 2020. As a result, you could start withdrawing earnings after Jan. 1, 2025.
But waiting five years alone is only half of the equation. Withdrawals from your Roth IRA must be “qualified” in order for you to avoid taxes and penalties. Luckily, reaching age 59 ½ is the most common way to satisfy this particular requirement.
For instance, funding a Roth IRA at age 45 doesn’t mean someone can make tax- and penalty-free withdrawals from the account five years later. They’ll need to wait until age 59 ½, be disabled or meet one of the other requirements set by the IRS for qualified withdrawals. Likewise, if you open your first Roth IRA when you’re 58, the five years still need to pass before you can withdraw the earnings tax-free. Simply turning 59 ½ isn’t enough in this instance.
Failing to meet both the five-year rule and the rules governing qualified withdrawals may trigger income taxes on the earnings you withdraw, as well as a 10% tax penalty. Jeff, because you opened your Roth IRA in 2015 and you are over 59 ½ years old, you have already satisfied both rules. Plain and simple.
(And if you need help managing your Roth IRA, consider connecting with a financial advisor who serves your area.)
5-Year Rule for Roth Conversions
There is also a separate five-year rule for Roth conversions. If a person is under 59 ½ years old, they must wait five years before they can withdraw any money that’s converted from a traditional IRA into a Roth IRA. And unlike the first five-year rule that only needs to be satisfied once, this rule applies to each individual conversion.
Fortunately, you aren’t subject to early withdrawal penalties by virtue of your age, so this five-year rule also doesn’t apply to you. You’ll automatically avoid the 10% penalty on withdrawals from a converted Roth IRA.
However, here’s the context and rationale for this IRS rule:
Someone who’s under 59 ½ is generally subject to an additional 10% penalty on distributions from IRAs. Without this five-year rule, someone could simply convert a traditional IRA into a Roth IRA (paying the taxes on the conversion, of course) and then immediately withdraw the money from the Roth IRA, thereby sidestepping the 10% early withdrawal penalty. The five-year rule on Roth conversions closes this potential loophole.
Keep in mind that each five-year period starts on Jan. 1 of the year in which the conversion was made. (And if you need help doing a Roth conversion, consider speaking with a financial advisor who can guide you through the process.)
Bottom Line
As they say, age has its privileges. Because you are over 59 ½ and have satisfied the Roth IRA contribution rule, you no longer have to worry about taxes or penalties on any withdrawals you take from your Roth IRA.
Tips for Finding a Financial Advisor
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Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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If you’re working with a financial advisor but you’re unhappy with the results, you can always consider finding a new professional to work with. Here are some tips for navigating this transition, including how to notify your current advisor about your decision and what you should do before breaking off the professional relationship.
Brandon Renfro, CFP®, is a SmartAsset financial planning columnist and answers reader questions on personal finance and tax topics. Got a question you’d like answered? Email AskAnAdvisor@smartasset.com and your question may be answered in a future column. Questions may be edited for clarity or length.
Please note that Brandon is not a participant on the SmartAsset AMP platform, and he has been compensated for this article. Questions may be edited for clarity or length.
Photo credit: ©iStock.com/Kameleon007
The post Ask an Advisor: My RMDs Start Soon So I’m Converting $700k to a Roth, But I’m Getting Conflicting Info About Having to Wait Five Years appeared first on SmartReads by SmartAsset.
Kraken Starts Requiring Info on Self-Custody Crypto Wallet Ownership in the UK
Kraken, a U.S.-based cryptocurrency exchange, has started requiring additional information in the U.K. regarding transactions of self-custody wallets made to and from its accounts. Kraken sent an email to some of its U.K. customers, stating that if the information required was not provided, it could result in an account lock until the required data is […]
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A study from two Europe-based nonprofits has found that Microsoft’s artificial intelligence (AI) Bing chatbot, now rebranded as Copilot, produces misleading results on election information and misquotes its sources.
The study was released by AI Forensics and AlgorithmWatch on Dec. 15 and found that Bing’s AI chatbot gave wrong answers 30% of the time to basic questions regarding political elections in Germany and Switzerland. Inaccurate answers were on candidate information, polls, scandals and voting.
It also produced inaccurate responses to questions about the 2024 presidential elections in the United States.
Bing’s AI chatbot was used in the study because it was one of the first AI chatbots to include sources in its answers, and the study said that the inaccuracies are not limited to Bing. They reportedly conducted preliminary tests on ChatGPT-4 and also found discrepancies.
The nonprofits clarified that the false information has not influenced the outcome of elections, though it could contribute to public confusion and misinformation.
“As generative AI becomes more widespread, this could affect one of the cornerstones of democracy: the access to reliable and transparent public information.”
Additionally, the study found that the safeguards built into the AI chatbot were “unevenly” distributed and caused it to provide evasive answers 40% of the time.
Related: Even the Pope has something to say about artificial intelligence
According to a Wall Street Journal report on the topic, Microsoft responded to the findings and said it plans to correct the issues before the U.S. 2024 presidential elections. A Microsoft spokesperson encouraged users to always check for accuracy in the information obtained from AI chatbots.
Earlier this year in October, senators in the U.S. proposed a bill that would reprimand creators of unauthorized AI replicas of actual humans — living or dead.
In November, Meta, the parent company of Facebook and Instagram, introduced a mandate that banned the usage of generative AI ad creation tools for political advertisers as a precaution for the upcoming elections.
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Poloniex restores services after $100M hack, users await info on reimbursement plan
Poloniex said it has resumed deposit and withdrawal services after a recent breach of its hot wallets, according to a Nov. 15 statement.
On Nov. 10, a malicious actor compromised one of the exchange’s hot wallets, moving more than $100 million worth of digital assets, including Ethereum (ETH). At the time, the attacker had used the stolen funds to pump the Tron blockchain’s native TRX token, prompting speculations of an insider job.
Following the incident, Justin Sun, the exchange owner, confirmed that the firm was investigating the hack but failed to disclose specifics regarding the theft. However, he offered a 5% reward to the hacker if he chose to return the stolen funds.
A recent update from Poloniex confirmed that it has nearly completed its efforts to restore wallets, allowing the platform to function smoothly.
“In response to your concerns about Poloniex deposit and withdrawal services, we are pleased to announce that the restoration efforts have mostly been completed, and the platform is now operating smoothly,” Poloniex said.
Meanwhile, the firm has engaged an unnamed “top-tier” security firm to bolster user fund security, though ongoing security audits are still underway. Following these audits, the platform plans to resume deposit and withdrawal services promptly.
Poloniex has yet to respond to CryptoSlate’s request for additional commentary.
The exchange has yet to provide public information on its plan to reimburse affected users. However, Sun had previously assured the community that Poloniex was in a healthy financial position and would fully reimburse the affected funds.
Meanwhile, Poloniex is not the only Sun-linked exchange that has recently suffered a hack. In September, HTX was compromised in an exploit that resulted in a loss of $7.9 million. However, the attacker returned all of the assets siphoned from the platform.
Blockchain Assoc. requests info on Prometheum over ‘suspicious’ approval
United States crypto lobby group Blockchain Association has filed a request with the U.S. Securities and Exchange Commission, seeking information about the formerly little-known crypto company Prometheum.
The company became the center of the crypto industry’s attention this week when its CEO Aaron Kaplan testified at a House hearing and gave its support of regulating crypto under securities laws and the SEC, a position that’s starkly opposite to other vocal proponents of the industry.
On June 15, Blockchain Association counsel Marissa Coppel said the group filed a Freedom of Information Act (FOIA) request to the SEC seeking documents and communications related to Prometheum.
In a series of tweets, Coppel said she was “suspicious” that Prometheum was approved as a special purpose broker-dealer (SPBD) for digital assets “in the midst of aggressive SEC enforcement.”
Coppel was also skeptical at how Kaplan was able to provide testimony at a congressional hearing on regulations for the industry.
2/ The CEO somehow gets a seat in front of Congress and argues that Prometheum represents the compliant path for digital assets.
And they’ve paid $1.5+ million in sales commissions to a Chinese-affiliated entity with quite the regulatory track record.
Hmmm
— Marisa Tashman Coppel (@MTCoppel) June 15, 2023
FOIA requests are submissions by members of the public to U.S. federal agencies that can ask for records on any topic, in this case, the SEC’s information on Prometheum.
At the June 13 House hearing Kaplan said his firm did not receive any “additional exemptive relief from the SEC” when questioned by Representative Mike Flood.
For those that didn’t stick around until the end of the @FinancialCmte hearing today, this exchange between @USRepMikeFlood and @PrometheumInc CEO Aaron Kaplan is an absolute must-watch.
Flood explicitly lays out why Prometheum’s claims that their SPBD approval is evidence of a… pic.twitter.com/yCDDKHiLea
— Alexander Grieve (@AlexanderGrieve) June 13, 2023
Former SEC and FINRA staff
Meanwhile, others have raised suspicion over the background of the Prometheum team, noting that some are former SEC and Financial Industry Regulatory Authority (FINRA) staffers.
Prometheum’s chief compliance officer, Joseph Zangri, was an SEC enforcement attorney in the mid-to-late 1990s. In addition, the company’s chief regulatory officer, Rosemarie Fanelli joined the company in May 2021 after a nearly 14-year stint in senior roles at FINRA — a self-regulatory organization for the U.S. securities industry.
The co-founders and co-CEOs of Prometheum — Aaron and Benjamin Kaplan — also have a small degree of separation from former SEC staff. The Kaplans are attorneys at the law firm Gusrae Kaplan, which states it was established “by a former Chief Attorney of the SEC’s Division of Enforcement.”
Who look alot like these guys: pic.twitter.com/bcu4sgcv7s
— Matt Walsh (@MattWalshInBos) June 14, 2023
Gusrae Kaplan co-founder Martin H. Kaplan is also a Prometheum chairman.
It is not out of the ordinary for crypto companies to hire former regulatory staffers, however.
Following a lawsuit from the SEC, Binance.US hired former SEC enforcement co-director George Canellos as a lawyer. The newly appointed chief legal officer of stablecoin issuer Circle has a resume spanning many government roles including the U.S. Treasury and the Commodity Futures Trading Commission.
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