Page 8 - Roth IRA Brochure

WHAT IS A QUALIFIED DISTRIBUTION? (CONTINUED)
Hypothetical example

Ethan funds his first Roth IRA the year he turns age 57.

Any distribution he takes after the year he turns age 61 (five taxable years and over age 59½) is
income-tax-free and free from the 10% federal additional tax for early distributions.

WHAT IF THE DISTRIBUTION IS NOT A QUALIFIED DISTRIBUTION?

Withdrawn earnings are taxed as ordinary income, and subject to 10%
federal additional tax unless an exception applies. However, you can
take advantage of ordering rules to help avoid the income tax and 10%
federal additional tax.

WHAT ARE THE ORDERING RULES?

Nonqualified distributions are withdrawn in this order:

First Second Third

Contributions Conversions Earnings
(e.g., the $6,000-or (including from employer retirement plans)

$7,000-per-year amounts) on a first-in first-out (FIFO) basis

Note that there are rules for determining which category applies when money is rolled over from a
designated Roth account to a Roth IRA. Designated Roth accounts are Roth 401(k), Roth 403(b), or
Roth governmental 457(b).

HOW ARE THE CONTRIBUTIONS OF A NONQUALIFIED
DISTRIBUTION TAXED?

Contributions are considered to come out first at the time of withdrawal
– so they are not subject to income tax or the 10% federal additional tax
for early distributions.

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