It depends. Let me give some basics about Roth. When you open a Roth and stays open for five years, that is referred to a five-year holding period. What this means is if you have earnings within the Roth, if you withdraw within the five-year holding period you will be taxed on the earnings. In addition to being taxed, you will suffer an early withdrawal penalty if you are under 59 1/2. This would be an example of a non-qualified distribution because the five-year holding period has not been met.
A qualified distribution from a Roth IRA is tax-free and penalty-free, provided that the five-year aging requirement has been satisfied and one of the following conditions is met:
- Over age 59½
- Death or disability
- Qualified first-time home purchase
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