Non-Qualified Distribution

DEFINITION of 'Non-Qualified Distribution'

1) A distribution from a Roth IRA that occurs before the Roth IRA owner meets certain requirements (see definition for qualified distributions).

2) A distribution from an education savings account that exceeds the amount used for qualified education expenses.

BREAKING DOWN 'Non-Qualified Distribution'

Typically, when a distribution is non-qualified, the amount attributable to earnings will be subject to income tax and an early-distribution penalty of 10%.

RELATED TERMS
  1. Qualified Distribution

    Distributions made from a Roth IRA that are tax and penalty free. ...
  2. Roth IRA

    An individual retirement plan that bears many similarities to ...
  3. Ordering Rules

    The order in which Roth IRA assets are distributed. Assets are ...
  4. Roth IRA Conversion

    A reportable movement of assets from a Traditional, SEP or SIMPLE ...
  5. Backdoor Roth IRA

    A method that taxpayers can use to place retirement savings in ...
  6. Individual Retirement Account - ...

    An investing tool used by individuals to earn and earmark funds ...
Related Articles
  1. Retirement

    Tax Treatment Of Roth IRA Distributions

    Learn the requirements for withdrawing funds tax and penalty free.
  2. Retirement

    How a Roth IRA Works After Retirement

    What retirees need to know about taxes, distributions and passing on your unspent savings to the next generation.
  3. Retirement

    Roth IRAs Tutorial

    This comprehensive guide goes through what a Roth IRA is and how to set one up, contribute to it and withdraw from it.
  4. Retirement

    Roth vs. Traditional IRA: Which Is Right For You?

    To answer this question, you need to consider several of the factors we outline here.
  5. Retirement

    5 Secrets You Didn’t Know About Roth IRAs

    Being financially savvy requires knowing a few secrets about Roth IRAs, which, for some, are very attractive retirement instruments.
  6. Financial Advisor

    Is the Roth IRA Under Threat?

    Roth IRAs are one of the most popular retirement savings accounts. Could Congress ever decide that too much money is being sheltered from taxation?
  7. Managing Wealth

    Why Roth IRAs May Make Sense for the Wealthy

    A look at how Roth IRAs can reduce the tax bill for even the wealthiest taxpayers.
  8. Retirement

    Roth IRA Contribution Limits in 2016

    Discover the benefits of Roth IRA accounts and how much you can contribute for your retirement. Learn which IRA plan is best for you.
  9. Retirement

    Roth 401(k) Vs. Roth IRA: Which One Is Better?

    It all depends on your age, your income - and your plans for your retirement nest egg.
  10. Retirement

    Taking a Roth IRA Early Withdrawal for College Tuition

    Weigh this Roth IRA strategy against using a 529 plan to save for college – it may be smarter.
RELATED FAQS
  1. What are the tax consequences of a Roth IRA distribution if the IRA holder is younger ...

    The tax treatment of a Roth IRA distribution depends on whether the distribution is qualified. Qualified distributions from ... Read Answer >>
  2. I'm an 80 year old making increasing required minimum distribution (RMD) tax payments. ...

    First, some background information: the tax treatment of a Roth IRA distribution depends on whether or not the distribution ... Read Answer >>
  3. Earnings within a Roth IRA are tax free, so are these earnings included in the modified ...

    There are two possible answers to this question, depending on whether or not the distribution from the Roth IRA is qualified.Earnings ... Read Answer >>
  4. My Traditional IRA has been converted to a Roth IRA. Can I still make a qualified ...

    If you converted the funds less than five-years ago, you will not be able to meet the qualified distribution requirements. ... Read Answer >>
  5. I retired and transferred part of my pension distribution to a Roth IRA. If I am ...

    The age 55 exception applies only to distributions from qualified plans and 403(b) accounts. Once the assets have been credited ... Read Answer >>
  6. Can I withdraw money from my Roth IRA?

    Withdrawing money from you Roth IRA is taxed and penalized under certain conditions. Learn about the five-year rule and prerequisites ... Read Answer >>
Hot Definitions
  1. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  2. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  3. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  4. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  5. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
  6. Enterprise Value (EV)

    A measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is ...
Trading Center