Figuring out the puzzle

Why Are Taxes Due On A Roth After Age 59 ½ ?

This is a common question.  Many believe there are no income taxes due on Roth withdrawals after reaching that magic age of 59 ½.   However there are conditions on nontaxable withdrawals.  The IRS has rules that define a withdrawal as qualified distributions. Qualified distributions from a Roth IRA are received free of income tax and are not subject to the 10% premature withdrawal penalty tax.

Roth IRA distributions that do not meet the qualified distribution requirements will be included in income to the extent that the distribution represents earnings on Roth IRA contributions and may be subject to a 10% premature withdrawal penalty tax. 

Qualified distributions from a Roth IRA are not included in gross income and are not subject to the additional 10% penalty tax for premature distributions.

To be a tax-free qualified distribution:

  • The distribution must occur more than five years after the individual first contributed to the Roth IRA;  and
  • The individual must be at least 59-1/2 years old, disabled, deceased or the funds must be used to purchase a first home ($10,000 lifetime limit). 

There is no requirement that distributions from a Roth IRA begin by age 70-1/2.

Unlike regular IRAs, contributions to a Roth IRA can be made after age 70-1/2.

For help you may ask questions in the comments or contact me privately here: Tim Barton Chartered Financial Consultant