Roth IRA 5 Year Rule Definition
This article answers the question, “What is the Roth IRA 5 year Rule?”. When a Roth Individual Retirement Account (IRA) is opened and money is deposited, there is a five-year waiting period that must be observed before withdrawals (qualified distributions) can be made without penalty. That is, the money must remain in the Roth IRA account for at least five years from the date opened, and withdrawals prior to the five full years will incur a 10 % early distribution (non-qualified) penalty. In addition, there are other rules associated with withdrawing once the five-year period is met, such as being 59 ½ years old. Essentially, the five-year waiting period applies, in answering the question, “What is the Roth IRA 5 year Rule? For example, understanding the rules about transferring funds from one IRA account to another account prior to the five-year period. To avoid the 10% early distribution penalty, the Roth IRA 5 year rule requires that the funds remain in the account for five years.