The 5-year rule on Roth conversions requires that you wait five years before withdrawing any converted balance, contribution or profit, regardless of your age. If you withdraw money before the end of five years, you'll have to pay a 10% penalty when you file your tax return. This rule for Roth IRA distributions stipulates that five years must have elapsed since the tax year of your first contribution to the Roth IRA before you can withdraw profits from the account tax-free. If Jeremy converts his IRA into a Roth IRA, he'll also need to declare the amount as ordinary income; however, he can now withdraw his after-tax capital from his Roth IRA (the conversion amount) without an early withdrawal penalty.
For this rule, the five-year period starts on the first day of the tax year in which you converted money from a traditional IRA (or made a transfer from a qualified retirement plan) to your Roth IRA. A Roth IRA is an IRA that, except as explained below, is subject to the rules that apply to a traditional IRA. Like the previous rule, withdrawals from the conversion of a traditional IRA or 401 (k) to a Roth IRA are subject to a five-year waiting period to avoid a penalty. For those who don't have IRA funds to convert, they can even create an IRA for the sole purpose of making a conversion, since traditional IRA contributions have no income limits (income limits only determine whether the contribution will be deductible or not).
On the other hand, under Treasury Regulation 1408A-10, Q%26A-4 (a), for a Roth IRA what counts is the original 5-year Roth IRA rule.