Question of the Month (August 2019): Roth IRA Qualified Distribution

Posted by Mike Long, CFP®, ChFC®, CLU®

Aug 2, 2019

Mike, age 50, established a Roth IRA on 04/01/19, with a $5,000 regular contribution for 2018. What is the first possible year Mike will be able to make a qualified distribution from the account?

  1. 2029
  2. 2023
  3. 2024
  4. 2019

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Correct answer: B. 2023

Instructor insight:

Mike can make a qualified distribution from the Roth IRA after 5 years in 2023. A qualified distribution may occur after two requirements have be met:

  1. 5 year holding period, and
  2. either death, disability, first-time home purchase by the account owner, or attainment of age 59 1/2.

The only absolute requirement is a 5-year holding period. Attainment of age 59 1/2 is not an absolute requirement but is one of the qualifying circumstances. Students often mistakenly think a qualified distribution may only occur after age 59 1/2. Death, disability, or first-time home purchase can occur at any age. Therefore, the first year a qualified distribution may occur is after the 5-year holding period is satisfied. In this question, 5 years is the end of 2022. January 1, 2023 is the first eligible date for a qualified distribution, as the 5-year clock started January 1, 2018.

 

Topics: Practice Questions

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Last updated: December 28, 2023

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