qualified distributions out of Roth
we have a case where client lost their job and we have another case where another client needs funds out of their Roth IRA for education purposes . according to the qualified distribution chart loss of job or education are not reasons to bypass the 10% penalty and qualify for qualified distribution.
Could you let me know if there are catastrophic circumstances like loss of a job that would qualify a person to take money out of their Roth IRA if not 591/2 yrs of age?
Permalink Submitted by Alan Spross on Thu, 2011-09-08 20:53
If the Roth is not yet qualified, distributions come first from regular contributions and they are tax and penalty free. Next conversions come out tax free, but subject to penalty if not held for 5 years. Higher education expenses will waive the penalty, but not job loss. Earnings come out last and are taxable and subject to penalty, and higher education costs will waive the penalty, but not the taxes.
There is also a penalty waiver for the medical insurance costs of those who collected UC for 12 consecutive weeks following job loss.