What is Qualified Distribution?
A qualified distribution refers to a tax and penalty-free withdrawal from a Roth IRA.
How Does Qualified Distribution Work?
A qualified distribution must meet two main requirements. First, it must occur at least five years after the Roth IRA owner established and deposited funds into his or her Roth IRA. Second, the Roth IRA owner must be at least 59.5 years old or disabled at the time of the distribution, or the distribution must be used for a qualified purchase or the distributions are being made to a beneficiary of the Roth IRA holder after his or her death.
Why Does Qualified Distribution Matter?
If distributions are made that do not meet the criteria, the distribution will be subject to a penalty (usually 10% of the amount of the distribution) and taxes at the current tax bracket of the Roth IRA holder.