Roth IRA Withdrawals

There are three potential parts to the balance of your Roth IRA; the contributions you made, any contributions made as a result of a conversion, and the earned money made by the investments in the account. The contributions you have made can be withdrawn at any time. Since you have already paid taxes on those funds, it does not count as earned income and is not taxed at the end of the year. If you continue to withdrawal beyond the amount of your contributions, the funds may be taxed a 10% fee if they are not considered qualified distributions. Once the initial contributions have been distributed, the IRS considers the next distribution part of any converted funds you may have contributed. Distribution of converted funds in less than five years of the conversion is not considered a qualified distribution. Finally, your earnings on your contributions are the last funds to be distributed once your contributions and converted funds are exhausted.

Roth IRA Qualified Distributions

In order to withdraw funds (other than contributions) and have them not count towards your gross income, they must meet several requirements to be a Qualified Distribution. A distribution is qualified if it is made 5 years after you first contributed to your Roth IRA and it occurs after you reach age 59 1/2. Additionally, if the distribution is made because you are disabled or is for a first home, the distribution is considered qualified. Distributions that are not qualified are subject to a 10% tax.