Suze Orman’s Women & Money (And Everyone Smart Enough to Listen)
Episode: The Ultimate Roth Five Year Rule Masterclass
Date: September 14, 2025

Episode Overview

In this “masterclass” episode, Suze Orman dives deep into the complexities of the Roth IRA Five-Year Rules—a confusing but critical topic for those seeking to maximize the tax advantages of their retirement accounts. Suze clarifies the differences between contributory Roth IRAs and Roth conversions, explains the two distinct five-year rules, and answers listener questions (moderated by her partner, KT) to clear up frequent misconceptions. Throughout, Suze emphasizes the importance of starting the five-year clock as early as possible—even with just $1—to take full advantage of Roth IRA flexibility in retirement.

Key Discussion Points & Insights

1. Roth IRA Basics (Contributory vs. Converted)

• Contributory Roth IRA: Funded with after-tax dollars contributed annually by the account owner.

  • Main Rule: Original contributions can be withdrawn at any time, tax- and penalty-free, regardless of age or how long the account has been open.
  • Earnings: Only earnings are subject to the five-year rule and may also be subject to age requirements.

• Roth IRA Conversions: Funds converted from pre-tax retirement accounts (like traditional IRAs or 401(k)s) into a Roth IRA.

  • Main Rule: Each conversion starts its own five-year clock to avoid a 10% penalty on withdrawals of converted amounts if the account owner is under 59½.

Memorable Quote:

“The five year rule does not apply to your contributions. It only applies to earnings.”
— Suze Orman (03:00)

2. Deep Dive: The Two Roth IRA Five-Year Rules

Rule 1: Five Years for Earnings (Contributory Roth or Converted)

• Applies to: Tax-free withdrawal of earnings.
• Conditions: The account must be open for at least five years AND the account holder must be 59½ or older.
• Implication: Even if over 59½, if the Roth hasn’t been open five years, taxes (and sometimes penalties) apply to the earnings portion.

Rule 2: Five Years for Each Conversion (Penalty on Withdrawal of Converted Amount)

• Applies to: Withdrawals of converted funds by those under 59½.
• Condition: Each conversion triggers a new five-year clock.
• Implication: Withdraw converted money before five years (and before age 59½), and a 10% penalty applies, even though tax was already paid at conversion.

Memorable Quote:

“Every Roth conversion has its own five year time clock and you have to know the difference.”
— Suze Orman (07:40)

3. Illustrative Scenarios and Practical Tips

• Starting Roth IRAs Late: If you open and fund a Roth IRA at 58 and withdraw at 60, you’ll avoid the 10% penalty due to age but will owe ordinary income tax on earnings until five years are up.
• Early Conversions: Convert at 40; you can’t access the converted funds for five years without a 10% penalty, even though you already paid tax.
• The Power of Early Accounts: Open a Roth IRA as soon as possible, even with just $1, to start the five-year clock for both contributions and any future conversions.

Memorable Quote:

“I don't care if you put $1 in it... that is the Roth IRA that is going to follow you and your time clocks for the rest of your life.”
— Suze Orman (13:44)

4. Common Mistakes Highlighted by Suze

• Assuming you can withdraw conversion amounts at any time.
• Forgetting that earnings aren't tax-free until both the five-year AND age 59½ requirements are met.
• Delaying opening a Roth IRA (“Even that $1 gets your clock going!”).
• Confusing the “earnings” five-year rule with the “conversion” five-year rule.

5. Listener Q&A (Moderated by KT)

KT joins to pose the most frequent listener questions, turning the episode into an interactive mini-clinic.

Key Listener Questions & Answers (Timestamps refer to answers):

• Q1: I’m 58 and just converted $100,000. I’ll be 63 when the five-year clock is up. Do I owe the 10% penalty if I withdraw early (over age 59½)?
  A: No 10% penalty applies after turning 59½, regardless of when you converted. (18:00)

  • “The magic age is 59½. Once you all reach 59½, it doesn't matter when you convert, it doesn't matter about anything. The 10% early withdrawal penalty for age no longer applies.”
    — Suze Orman (17:59)

• Q2: I’m 45 and converted $20K at age 40. Five years are up—can I access the conversion, and what about earnings?
  A: You can withdraw the converted amount, no penalty. However, touching earnings before 59½ triggers taxes and penalties. (18:46)

• Q3: If I convert and die before five years have elapsed, does my beneficiary serve out the clock?
  A: No; beneficiaries are not subject to the 10% early withdrawal penalty but could owe income tax on earnings if the Roth hasn't been open five years. (21:16)

  • “That is why you are to open up a Roth IRA first thing Monday morning if you do not have one.”
    — Suze Orman (21:43)

• Q4: I've had a Roth since 2010, just converted more money last year, I’m 62. Do I need to wait another five years to touch the earnings?
  A: No. The original five-year clock (from 2010) applies, so funds are immediately accessible. (22:06)

• Q5: I converted $50K at 35, now need $10K back at 38. Can I just withdraw part of what I converted?
  A: Yes, but any portion withdrawn within the five-year window will incur a 10% penalty (on the amount withdrawn). (23:12)

6. Memorable Moments and Quotes

• On Complexity:
  “Believe it or not, it is a very, very complicated topic.” — Suze Orman (16:36)
• KT’s Honesty:
  “She confused me, but I’m here.” — KT (16:19)
• On Giving to Yourself:
  “When we say people first, we mean you. You have to give to yourself as much as you give of yourself. Don’t you ever forget that I said that.” — Suze Orman (24:24)

Timestamps for Major Segments

• [01:00–07:00]: Contributory Roth IRAs, basics, and the “no five-year rule for contributions.”
• [07:00–16:00]: Roth IRA conversions, two five-year rules explained, practical examples.
• [16:00–24:00]: KT joins, listener Q&A — real scenarios about conversion timing, penalties, and beneficiaries.
• [24:15–24:22]: Suze's core lesson: “People first, then money, then things.”

Conclusion & Actionable Takeaways

• Start a Roth IRA ASAP—any amount—to get the five-year clock ticking.
• Know the difference: The five-year rule for earnings (plus age 59½) vs. the five-year rule for conversions (avoid 10% penalty if under 59½).
• Don’t confuse rules — treat contributions, conversions, and earnings as separate withdrawal buckets with separate rules.
• If in doubt: Remember Suze’s mantra: “People first, then money, then things… and that means you.”

For full details, relatable stories, and extra clarity, Suze recommends listening to this episode again and writing your own questions to her via the podcast email.

Best Quotes Recap:

• “Every conversion takes on the five-year clock of your very first Roth IRA that you opened.” (12:30)
• “Open up a Roth IRA, whether you’re going to fund it or not.” (13:51)
• “Don’t confuse the rules. So I hope I haven’t confused you more.” (15:48)

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