Taxability of Roth Distributions
If I may, I would like to confirm my understanding of the Taxability of Roth Distributions. Are each of the following statements true?
1. Distributions of regular contributions are never taxed or penalized.
2.Distributions of Conversion money are never hit with a regular tax.
3. Distributions of Conversion money are only ever 10 % penalized IF under age 59 ½ AND within 5 yrs of conversion.
4. Distributions of Earnings are both taxed and penalized if under age 59 1/2.
5.Distributions of Earnings are only taxed when over age 59 ½ IF within 5 year contribution period.
6. Distributions of Earnings are never 10% penalized if over age 59 1/2.
Thanks in adance
Permalink Submitted by Alan Spross on Wed, 2011-01-26 20:40
Yes, all true.
But note that there are other exceptions that can waive the 10% penalty besides reaching 59.5, such as disability or certain expenses like higher education and medical costs, and up to 10k for a first home purchase.
And to properly identify what portion you are distributing, follow the ordering rules until the Roth is fully qualified.