What is an IRA distribution?
A withdrawal from an IRA is referred to as a distribution. Distributions can come in the form of several payment patterns, from a one-time (lump-sum) payment to a series of distributions over a number of years. Depending on how old you are at the time of the distribution, the payment may be classified as a premature distribution (made prior to age 59), a normal distribution (between ages 59 and 70), or a required minimum distribution (after age 70). There are tax consequences to any type of traditional IRA distribution. Caution: This discussion pertains primarily to distributions from traditional IRAs. Qualified distributions from Roth IRAs are tax-free. Even Roth IRA distributions that don’t qualify for tax-free treatment are tax free to the extent of your own contributions to the Roth IRA. Only after you’ve recovered all of your contributions are distributions considered to consist of taxable earnings. Further, special rules apply to distributions taken from Roth IRAs that have funds
One of the most common methods used by individuals to save money for retirement is the individual retirement account (IRA). The U.S. government has offered incentives through the tax code for the use of IRAs, making them a valuable tool for accumulating retirement savings. When a person stops putting money into an IRA and begins to withdraw money from it, these withdrawals are called IRA distributions. With a traditional IRA, a periodic IRA distribution can be taken, free of any penalties, once the account owner reaches the age of 59.5 years. An IRA distribution can actually be taken at any time, though a penalty usually applies if this is done too early. Eventual withdrawal from an IRA is considered taxable income, but this does not mean that a certain amount of taxes cannot be avoided, using an IRA. For example, a person may contribute a large portion of their yearly income to an IRA, up to a certain dollar amount. These contributions can be made with pre-tax funds, meaning that a pe
