What are the ordering rules? Roth IRA distributions can consist of contributions, converted funds and

earnings – or any combination of the three. To determine what your distribution is, you must use “ordering

rules” which dictate the order in which these categories of Roth IRA money must be withdrawn. All Roth

IRAs are considered one Roth IRA for distribution purposes. A Roth IRA distribution will consist first of

any Roth IRA contributions. If there are no contributions or those amounts are completely exhausted, the

next funds out are converted funds. Once all converted funds have been exhausted, the remainder of the

distributions will consist of earnings.

1. Are you withdrawing a contribution? Roth IRA contributions are the annual amounts that you

contribute to a Roth IRA account. A distribution of Roth IRA contributions will always be both tax

and penalty free.

2. Are you withdrawing converted amounts before age 59 ½? Converted funds are never subject

to income tax. However, they will be subject to the 10% penalty for early distributions (unless

an exception applies) if you are under 59 ½ and they have been in a Roth IRA for less than five

years. Each conversion starts its own 10% penalty 5-year clock, and the converted amounts are

withdrawn on a first-in, first-out basis.

3. Are you withdrawing converted amounts after 5 years or age 59 ½? A distribution of

converted funds after 5 years or after age 59 ½ will be entirely income tax and penalty free.

4. Are you withdrawing earnings before age 59 ½? Earnings withdrawn prior to age 59 ½ are

generally subject to income tax regardless of how long they’ve been in a Roth IRA account.

Earnings withdrawn prior to age 59 ½ are also generally subject to the 10% penalty for early

distributions unless an exception applies.

5. Are you withdrawing earnings after age 59 ½ and 5 years? Earnings withdrawn after age 59

½ are never subject to the 10% penalty. They may, however, be subject to income tax. If you have

held any Roth IRA for more than 5 years, your earnings are tax free. If not, they are taxable at

ordinary rates.