Some individuals 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.
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
