US Tax withholding on Roth IRA withdrawal - Vanguard

I have been moving funds between my IRA and into my Roth IRA for the last number of years, almost all funds are now in Roth IRA - and all tax paid on those transfers. It has been just over 5 years since i started doing this. I now want to withdraw some of my Roth IRA balance, which i assume to be now tax free ( or tax paid to be more precise) - however when doing this on Vanguard it does not allow me to select a 0% tax withholding? Only a min of 10%. I am confused. The money is going into my US Citibank account. I live in the UK. Do i have to still pay the 10% and then claim it back on my annual tax return? I assumed it would be withdrawn with no tax liability. Help!

There is a form you can file with Vanguard to stop the withholding. I can't recall which form but @nun knows it.

Although my street address with Vanguard is my UK address I maintain my correspondence address with them using my daughter's US mail forwarding service but I should really file the forms and get it done properly.

It's the W-8BEN form.

Also, as I understand it each conversion starts a new 5 year clock, so although you may have done the first conversion just over 5 years ago if any subsequent conversions are into the same Roth IRA as the first they will not be withdrawable from that ROTH IRA without possible tax and penalties. Happy to be corrected on this if I am wrong.

There are possible taxes on Roth withdrawals before each 5 year elapsed time from conversion but it all depends.  I’ve read numerous confusing explanations of Roth 5 year rules but I think the attached link is one of the better ones.  Bottom line is that for anyone over 59 1/2 you can pull out the money you have converted within the 5 year window without taxes or penalty. However earnings on those ‘premature’ withdrawals are treated less favourably. https://erwealth.com/podcastblog/roth-ira-5-year-rules-explained

Likewise - happy to be corrected.

It's the W-8BEN form.

Also, as I understand it each conversion starts a new 5 year clock, so although you may have done the first conversion just over 5 years ago if any subsequent conversions are into the same Roth IRA as the first they will not be withdrawable from that ROTH IRA without possible tax and penalties. Happy to be corrected on this if I am wrong.

Thanks. That form works unless you are a US Citizen and I can’t remember if the OP is a USC or not.

I don’t believe the 5 year clock resets every time once you are over 59.5. You only need to have made any Roth conversion 5 years earlier.

https://www.bankrate.com/retirement/roth-ira-5-year-rule/

This rule for Roth IRA distributions stipulates that five years must pass after the tax year of your first Roth IRA contribution before you can withdraw the earnings from the account tax-free.

There are possible taxes on Roth withdrawals before each 5 year elapsed time from conversion but it all depends.  I’ve read numerous confusing explanations of Roth 5 year rules but I think the attached link is one of the better ones.  Bottom line is that for anyone over 59 1/2 you can pull out the money you have converted within the 5 year window without taxes or penalty. However earnings on those ‘premature’ withdrawals are treated less favourably. https://erwealth.com/podcastblog/roth-ira-5-year-rules-explained

Likewise - happy to be corrected.

Good article. As long as the 5 year rule is reached and you are over 59.5 then there is no such thing as a premature withdrawal and all distributions are completely tax free as I understand it.

Let's try to keep this simple: you will need to answer two questions to know if you’re good to go, and if your Roth IRA is qualified:

Has your Roth IRA been open and funded for at least 5 years?
Are you 59 ½ or older?
If you answered “yes” to both questions, then you do not have any restrictions or limitations on withdrawing any money from your Roth IRA. You can withdraw money you’ve converted, you can withdraw contributions, and you can withdraw earnings, all without any taxes or penalties. You are good to go, and the benefits of a qualified Roth account are yours! So, nice wor

Many thanks all for correcting my misunderstanding of the 5 year clock on conversions aged over 59.5

Just to add to the canon (because you can't have too many sources saying the same thing where taxes are concerned, can you?): https://www.privatebank.bankofamerica.com/articles/roth-ira-conversion.html#q7 [nofollow]