Qualified Distribution

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DEFINITION of 'Qualified Distribution'

Distributions made from a Roth IRA that are tax and penalty free. In order to be a qualified distribution, the following two requirements must be met:

1) It must occur at least five years after the Roth IRA owner established and funded his/her first Roth IRA

2) At least one of the following requirements must be met:

a) The Roth IRA holder must be at least age 59.5 when the distribution occurs.
b) Distributed assets limited to $10,000 are used towards the purchase or rebuilding of a first
home for the Roth IRA holder or a qualified family member.
c) The distribution occurs after the Roth IRA holder becomes disabled.
d) The assets are distributed to the beneficiary of the Roth IRA holder after his/her death.

BREAKING DOWN 'Qualified Distribution'

Distributions that do not meet the above criteria are considered non-qualified and may be subject to income tax and early distribution penalties.

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RELATED FAQS
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    If you close the Roth IRA now and withdraw the balance, you will be taxed on the earnings unless the distribution is qualified. ... Read Full Answer >>
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    Though some states protect IRA savings from garnishment of any kind, most states lift this exemption in cases where the account ... Read Full Answer >>
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    While there is no legal reason why you cannot withdraw funds from your IRA to start a traditional savings account, it is ... Read Full Answer >>
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    Depending on the state where you live, your IRA may be garnished by a number of creditors. Unlike 401(k) plans or other qualified ... Read Full Answer >>
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