In short
A Roth individual retirement account (IRA) takes after-tax contributions; qualified distributions, including earnings, are tax-free.
Key takeaways
- A distribution is qualified if the account is at least five years old and the owner is 59½, disabled, deceased or using up to $10,000 for a first home.
- Regular contributions can be withdrawn at any time, tax- and penalty-free.
- There are no required minimum distributions during the owner's life, but contributions are limited at higher incomes.
Where it's tested
REG: Retirement Plans & Tax Planning Basics — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A 45-year-old taxpayer takes a distribution from a Roth IRA opened three years ago, withdrawing an amount that exceeds total contributions. How is the excess (earnings) portion treated?