Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Qualified Distribution

What it is:

A qualified distribution refers to a tax and penalty-free withdrawal from a Roth IRA.

How it works (Example):

A qualified distribution must meet two main requirements. First, it must occur at least five years after the Roth IRA owner established and deposited funds into his or her Roth IRA. Second, the Roth IRA owner must be at least 59.5 years old or disabled at the time of the distribution, or the distribution must be used for a qualified purchase or the distributions are being made to a beneficiary of the Roth IRA holder after his or her death.

Why it Matters:

If distributions are made that do not meet the criteria, the distribution will be subject to a penalty (usually 10% of the amount of the distribution) and taxes at the current tax bracket of the Roth IRA holder.