If you made a Roth conversion in 2010, your five-year period has now been satisfied, and you meet the requirements for qualified distributions. Once you meet the requirements for qualified distribution, all distributions from any of your Roth IRAs will be tax-free and penalty free for the rest of your life. In fact, beneficiaries of your Roth IRAs can also take tax-free and penalty free distributions for the inherited amounts. In order for you to have a qualified distribution, you must meet two requirements. First, you must have held any Roth IRA for more than five years. The five-year clock starts on the first day of the year for which your first contribution is made and applies to all of your Roth IRAs. That means, if you completed a Roth conversion in 2010, you have now met this requirement. In addition, a qualified distribution requires one of the four:
1. The Roth IRA owner must be age 59 1/2 or older.
2. The Roth IRA owner has a disability as defined by the tax code.
3. The death of the owner.
4. A first-time home purchase with a lifetime of $10,000.
Of course, just because you can take tax-free and penalty free distributions from your Roth IRA, doesn’t mean that you should. If you don’t have to take distributions, it often pays you not to. Roth IRA money should be left alone for as long as possible because it not only grows tax and penalty free, but you never have a required minimum distribution. Let it grow!