Roth question

[JG EA]

A qualified distribution is not taxed. Does a qualified distribution always means 5 years plus 59 1/2 (or other things)?

In reading it showed various examples of the earnings of early distributions being subject to tax and 10% penalty if not 59 1/2.

My question is if left in for 5 years could the earnings ever not be taxed? Or does the 5 years only work if in connection with 59 1/2 (or the other things).

[Matt Sova]

Roth IRA

If you take a distribution out of a Roth that you have had for at least 5 years and you are over 59 1/2 then nothing is taxed. If you are under 59 1/2 you are not taxed to the extent that basis was taken out. For instance, you contributed 2,000/yr for 8 years total of 16k in contributions. You have had the Roth for > 5 years. You take a distribution of 10k and you are only 47. There is no tax and no penalty because you are just removing part of your basis.

Same scenario, but you take out 20k. Since you are 47 you will pay tax and penalty on 4k (20k - 16k basis). If you were > 59 1/2 there would be no tax and no penalty.

[JG EA]

Thank you,

I appreciate the help!