Function

• The IRS does not allow for tax-deductible Roth IRA contributions as it does with traditional IRAs. It does, however, provide a major back-end tax benefit not found with traditional IRAs. If you take a qualified distribution from a Roth IRA account, the IRS does not charge taxes on any part of the withdrawal, including earnings such as interest, dividends and capital gains.
  
  

Retirement

• Many investors realize a qualified Roth IRA distribution in retirement, which occurs at age 59 1/2 as far as the IRS is concerned. As long as you have held your Roth IRA account for at least five tax years, the IRS lets you take out your money when you reach age 59 1/2 without taxes or penalties.
  
  

Early Withdrawals

• The IRS permits Roth IRA account holders to remove their original contributions at any time, free of taxes and penalties. If, however, you take an early withdrawal (before age 59 1/2), expect to pay regular income tax on any earnings you remove from your account plus a 10 percent additional tax penalty on the amount. Exceptions to this rule exist. If you become disabled or you use up to $10,000 worth of Roth IRA money to cover first-time home buyer expenses or if a beneficiary taps your account after your death, the IRS does not tax earnings or charge the penalty.
  
  

Considerations

• When you take a Roth IRA distribution that can trigger taxes, the IRS ensures that you don't pay taxes unless you have removed all your original contributions by ordering your distributions. As IRS Publication 590 explains, when you take a withdrawal, the IRS removes your original contributions first, any conversion or rollover contributions second and taxable funds from the account, typically earnings, third.