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Will A Distribution From My Roth IRA Be Tax & Penalty-Free?

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Retirement / Decumulation, Tax Planning, Assets and Investment Planning
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**This guide has been updated to incorporate new changes made by The SECURE Act 2.0 that are effective for the 2023 year. Any SECURE Act 2.0 changes that are effective for 2024 will be incorporated into this guide at the start of the 2024 year. 

Some clients may have unique circumstances that could result in a distribution from a Roth IRA being taxed or penalized. Many of these situations rarely come up, which makes it hard to remember the usual distribution rules from a Roth IRA.

To help make this easier, we have created the “Will A Distribution From My Roth IRA Be Tax & Penalty-Free?” flowchart. This flowchart helps to quickly identify circumstances that could have an impact on how a distribution is taxed (and penalized). It considers the following:

  • The 5-Year Rule
  • Impact of Roth conversions
  • Distribution ordering rules
  • Conditions that trigger the 10% early distribution penalty
  • Exceptions to the 10% early distribution penalty

 

Updated for 1/19/2023


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