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Roth IRA Distribution

  • Contributions to a Roth IRA may be distributed without tax or penalty at any time.
  • Conversions or rollovers may be distributed after 5 years (first in, first out: see below).
  • Distributions of earnings can be distributed without penalty after the account holder reaches 59.5 years of age; as long as it was made after the 5 year period beginning when a contribution to ANY Roth account for the benefit of the individual was made.

Roth IRA Minimum Distribution Rules: Tax Consequences Depend on Source of Funds and if Distribution is Qualified or Non-qualified

Distributions occur in specific order: 1) Regular Contributions, 2) Taxable Rollovers/Conversions, 3) Non-taxable Rollovers/Conversions, 4) Earnings
 
A distribution is qualified if it meets following criteria:

1) made after 5 year period beginning with the first taxable year a Roth contribution was made, and
2) the payment or distribution was either:
       a) made after 59 ½, or
       b) made because of disability, or
       c) made to beneficiary because of death or,
       d) one that meets the requirements under first home exception


Regular Disributions

Qualified Distributions
Tax and Penalty Free
 
Non Qualified Distributions
Tax and Penalty Free
 

Conversions and Rollovers

Qualified Distributions
Tax and Penalty Free

Non Qualified Distributions
Was the 5 year rule for conversions/rollovers satisfied?
Yes – Tax and Penalty Free
No – go to next question
Does it meet an exception to the early withdrawal penalty?
Yes – Tax and Penalty Free
No – Subject to 10% early withdrawal penalty (only on the portion of the conversion or rollover that was originally included in gross income)
 

Earnings

Qualified Distributions
Tax and Penalty Free

Non Qualified Distributions
Does it meet an exception to the early withdrawal penalty?
Yes – Subject to Ordinary Income Tax
No – Subject to 10% early withdrawal penalty along with Ordinary Income Tax
 
Exceptions to the 10% additional tax for early withdrawal for Non-Qualified  Roth IRA Distributions
  1. You have reached age 59 ½
  2. You are totally and permanently disabled
  3. You are the beneficiary of a deceased IRA owner (see Roth Bene IRA rules for more)
  4.  You use the distribution to buy, build or rebuild a first home (up to a $10,000 limit)
  5. The distributions are part of a series of substantially equal payments
  6. You have unreimbursed medical expenses that are more that 10% (or 7.5% if you or your spouse was born before 1/2/1952) of your adjusted gross income for the year
  7. You are paying medical insurance premiums during a period of unemployment
  8. The distributions are not more than your qualified higher education expenses
  9. The distribution is due to an IRS levy of the qualified retirement plan
  10. The distribution is a qualified reservist distribution
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