TRANSCRIPT: 

Think Roth IRAs are all tax-free? No strings attached? Think again. There’s a hidden rule that trips up smart investors all the time. And if you miss it, it could cost you thousands. Hi, I’m Hunter Brockway with Boca Retirement Strategies. We help people retire successfully with more money, fewer taxes, and no nasty IRS surprises. If you’re considering a Roth conversion or already made one, this next part is for you. There are two different five-year rules for Roth IRAs. And confusing them—that’s where folks get burnt. Rule number one is for Roth contributions. Once you make your first contribution, a five-year clock starts. As long as you’re over 59½ and 5 years have passed, you can pull out earnings tax-free. But now, rule number two is the gotcha: Roth conversions. Let’s say you convert $50,000 from your traditional IRA to a Roth in 2024. Sounds great, right? But if you pull any of that $50,000 out before 2029 and you’re under 59½, guess what? You could owe a 10% early withdrawal penalty—even though you already paid taxes when you converted it. So, who should care about this? If you’re under 59½ and doing multi-year Roth conversions, this affects you. Younger investors thinking you can tap in early, be careful. But if you’re 59½ or older, congrats. You’re mostly in the clear. So, here’s how to stay safe.

The smart move: treat each Roth conversion like a fine wine. Every vintage matures after 5 years. Track them separately. Don’t convert funds you’ll need in under 5 years if you’re under 59½. That’s like asking the IRS to take a slice. Roth IRAs can be retirement rock stars, but only if you understand the rules. The 5-year conversion rule is one of the most misunderstood traps that I see. If you’ve got questions about Roth conversions, retirement income, or just want to make sure you’re not making a costly mistake, shoot us an email at contact@bocaretirement.com. We’d love to help. If today’s video got you thinking about your own retirement planning, I’d like to offer you something to help you see the bigger picture. We’ve created a tax-smart comprehensive retirement workbook for pre-retirees and retirees.

If there’s one thing I’ve noticed in my years of working with individuals, it’s that there’s always at least one aspect in the planning process where they say, “Hm, I haven’t thought about that before.” No matter how smart they are, how much they’ve saved, something comes up. Whether they realize they can spend more than they thought, or their tax bill will be higher in retirement, or they’re leaving money on the table with their current Social Security claiming strategy. This workbook is designed to help you walk through the most critical areas of retirement planning with action steps, false beliefs, and areas for your own reflection. You can download the workbook by going to the link below in the description. If you have any issues with that link, send us an email at contact@bocaretirement.com. If you get through this workbook and you’d like your responses reviewed or have any questions, I’m happy to have that conversation with you, too. As always, this is no cost, no obligation, and no pressure.