If I decide to take distributions from a Roth IRA, do I have take distributions in a certain order?

In general, you cannot pick and choose the origin of each distribution you take. For example, if you take a distribution before the five-year holding period is up, you would want to take your contributions first, because they are not subject to tax or penalties. However, the ordering rules for determining Roth distributions are quite taxpayer favorable. Roth distributions are deemed to come out in the following order:

These ordering rules can significant impact the tax treatment of the distributions. For example, if you take a distribution before the five-year holding period is up of if you fail to satisfy the other requirements of a qualified distribution, the withdrawal still won’t be subject to the early distribution tax as long as you have taken less than the total amount of all contributions you have made to your Roth IRAs. Note that for purposes of these ordering rules, all Roth IRAs are considered a single Roth IRA.

Please contact one of our Roth IRA Experts at 800-472-0646 for more information.


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