Lisa,age 45,needed some cash so she withdrew $50,000 from her Roth IRA.At the time of the distribution,the balance in the Roth IRA was $200,000.Lisa established the Roth IRA eight years ago.Through a rollover and annual contributions,she has contributed $80,000 to her account.What amount of the distribution is taxable and subject to early distribution penalty?

Question

Quizplus · Accepted Answer

Since Lisa withdrew from her Roth IRA, there are no taxes or penalties on the distribution. Roth IRAs are funded with after-tax dollars, so distributions are tax-free as long as the account has been opened for at least five years and Lisa is at least 59½ years old. Since Lisa is 45 years old and has only had the Roth IRA for eight years, she would normally be subject to the early distribution penalty of 10% on top of any taxes owed. However, since she withdrew from a Roth IRA, there is no penalty or taxes owed on the distribution.

Lisa,age 45,needed Some Cash So She Withdrew $50,000 from Her