Frequently Asked Question

March 28 2007 | Filed Under ยป , ,

What are the exceptions to the early distribution penalty for a non-qualified Roth IRA distribution?

The exceptions are as follows:
  • The distribution is made on or after the date you reach age 59.5
  • The distribution is made while you are disabled and you can furnish proof that you cannot do any substantial gainful activity because of your physical or mental condition. A physician must determine that your condition can be expected to result in death or to be of long, continued and indefinite duration.
  • The distribution is part of a substantially equal periodic payment (SEPP).
  • The distribution is made by your beneficiary after your death.
  • The distribution is made as a result of an IRS levy.
  • The distribution is used for a first-time home purchase for you or an eligible family member (subject to a lifetime limit of $10,000). This includes expenses to build or rebuild a first home.
  • You have unreimbursed medical expenses that are not more than (a) the amount you paid for unreimbursed medical expenses during the year of the distribution, or (b) minus 7.5% of your adjusted gross income for the year of the distribution.
  • You are paying medical insurance premiums for yourself, your spouse and your dependents after losing your job and:
    • You received unemployment compensation paid under any federal or state law for 12 consecutive weeks because you lost your job.
    • You receive the distributions during either the year you received the unemployment compensation or the following year.
    • You receive the distributions no later than 60 days after you have been reemployed.
  • The distributions are not more than your qualified higher education expenses.
  • The distribution is attributed to amounts that were non-taxable when converted.
  • The distribution is attributed to amounts that have been converted for at least five years.

To learn more, read Avoiding IRS Penalties On Your IRA Assets.

Question answered by Denise Appleby, CISP, CRC, CRPS, CRSP, APA
by

Denise Appleby

Denise Appleby
Denise Appleby is founder and owner of Appleby Retirement Consulting,which provides technical consultation, content, coaching, writing, editing and training services on related topics.


With more than 14 years of experience in the IRA and defined-contribution plans fields, Appleby has held several senior retirement-plan related positions with Pershing LLC, which included vice president of plans products and services, retirement plans manager, trainer, training manager, compliance consultant, technical help desk manager and writer.
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