A Roth IRA distribution qualifies when the account has been open at least five years and the account holder is permanently disabled.

If you’re digging into the Intuit Academy Tax Level 1 material, you’ve probably bumped into Roth IRAs and the special rules around distributions. Here’s the plain-English version you can actually use in real life. Let me explain the key idea: a Roth IRA distribution becomes qualified when two things happen at once—the account has been open for at least five years, and a qualifying event occurs (like disability, death, age 59½, or a few other scenarios). Among those events, permanent disability is one of the clear paths to a tax-free, penalty-free distribution. That’s the core takeaway for this topic.

What exactly is a qualified distribution?

Think of a Roth IRA like a tax-time bomb that’s been ticking since day one. Your contributions were made with after-tax dollars, so you can pull them out tax-free. But the earnings—the growth inside the account—need to reach a certain threshold before you can pull them out without taxes or penalties. A “qualified distribution” is one that is tax-free and penalty-free because it meets two conditions: the five-year rule and a qualifying event.

• The five-year rule means the account must have been open for at least five tax years.

• The qualifying event is things that the IRS recognizes as legitimate reasons to access earnings without penalty or tax.

Put those together, and you’ve got the framework for whether a distribution is qualified. A lot of the confusion around Roths comes from remembering both pieces at once—and knowing which event counts.

The five-year rule—why it matters

Let’s pause on the five-year rule for a moment. It’s not about how long you’ve been saving for retirement in general; it’s specifically about the Roth’s tax-advantaged status. Even if you’re at the magic age of 59½, you still need the five-year clock to be ticked for the earnings portion to come out cleanly. Forgetting the five-year requirement is a common mistake.

Here’s a simple mental model: the Roth opens the door to tax-free growth the first year you contribute, but the earnings inside can only be withdrawn without taxes or penalties after the account has been around for five years and a qualifying event occurs. If you take money out before both pieces line up, you’ll face penalties or taxes on the earnings portion—though your contributions aren’t taxed again (you already paid taxes on those). The five-year rule is the “green light” timer for earnings, in effect.

Permanent disability as a qualifying event

This is the heart of the multiple-choice question you’re grappling with. The correct answer—permanently disabled—fits squarely into the list of qualifying events that make a distribution qualified once the five-year rule is satisfied. In practical terms:

• If the Roth IRA has been open for at least five years, a distribution taken because you’re permanently disabled can be tax-free and penalty-free.

• This is true even if you’re younger than 59½, which is the usual hurdle for early withdrawals. The disability exception is one of the few times the penalty doesn’t apply.

Why does disability unlock this benefit? It’s part of the IRS’s recognition that when someone becomes permanently disabled, their ability to earn income is impaired, and the tax policy is designed to provide support by allowing accessible funds without extra penalties.

Other qualifiers you might hear about

While disability is a clear path, there are other events that can also make a Roth distribution qualified, provided the five-year rule is met. These include:

• Reaching age 59½

• Death of the account owner

• First-time home purchase (up to a $10,000 lifetime limit for the earnings portion)

A quick note on aging and homebuying: these are real-world scenarios people stumble into. They’re not about needing money for a vacation or a new gadget. The rules are designed to balance flexibility with the goal of encouraging long-term retirement savings.

Age, income, and the common myths

A common misconception is that something like age or income alone can determine whether a withdrawal is qualified. In Roth land, that’s not the case. Age 50, income thresholds, or how much money you make in a year don’t by themselves decide qualification. The deciding factors are the five-year clock and the qualifying event. This is one of those moments where the theory matters less than the practical rule: you need both pieces to line up.

If you’re under 50, you’ll hear about early withdrawal penalties more often. But remember, for a Roth distribution to be qualified, you still need the five-year rule and a qualifying event. The age line isn’t a loophole; it’s a separate consideration for penalties that doesn’t apply to qualified distributions when the two required conditions are met.

A practical way to think about it

Let’s put this into a real-world, everyday frame. Suppose you opened your Roth IRA five years ago, and you’ve been contributing steadily. Now you’ve encountered a life event that the IRS recognizes as a qualifying event—say you become permanently disabled. If your account has at least five years of history, cashing out because of disability would be a qualified distribution. The earnings portion comes out tax-free and penalty-free, which is exactly what you want when life throws a curveball.

On the flip side, if you’re considering taking money out before the five-year mark and you haven’t reached a qualifying event, you’ll likely face tax on the earnings and potentially a 10% early withdrawal penalty. The takeaway is simple: timing and the right trigger matter more than the size of your paycheck in this moment.

A real-world example to anchor the idea

Let me walk you through a quick scenario. You opened a Roth IRA in 2019. It’s now 2024, so the five-year rule is satisfied for the earnings portion. You’re permanently disabled in 2024. You decide to withdraw funds to cover living expenses. Because you’ve met both conditions—the five-year rule and the disability trigger—the distribution is considered qualified. You won’t owe taxes on the earnings portion, and you won’t face the 10% early withdrawal penalty. The money is there to help when you truly need it, and that’s the design behind the rules.

What this means for your planning

If you’re studying these concepts as part of the Intuit Academy Tax Level 1 material, here’s the practical takeaway:

• Know the two-part test for Roth qualified distributions: five-year rule plus a qualifying event.

• Permanent disability is a qualifying event that allows tax- and penalty-free treatment, assuming the five-year rule is met.

• Don’t rely on age or income alone to decide whether a withdrawal is qualified; those aren’t the gating factors here.

• Remember that contributions and earnings are treated differently. Contributions can generally be withdrawn tax-free and penalty-free, but earnings follow the five-year plus qualifying event rule.

A few quick tips to stay sharp

• When you hear the word “qualified,” ask: has the five-year clock started, and is there a qualifying event? If yes, you’re on the right track.

• Distinguish between contributions and earnings. That distinction often determines whether taxes or penalties apply in non-qualified withdrawals.

• Keep a simple notebook or a sticky note of the qualifying events for Roth distributions. It’s easy to forget the homebuyer feature or the disability exception when you’re deep in numbers.

Closing thoughts

Roth IRAs are a powerful tool, but like any tool, they work best when you know how to use them in the right moment. The disability exception is a clear reminder that life can throw a curveball, and tax policy includes thoughtful ways to keep a safety net in place. The five-year rule isn’t meant to complicate matters; it’s there to ensure the Roth’s growth is preserved for the long haul while still offering flexibility for important life events.

If you’re parsing these ideas for real-world understanding, you’re on the right track. The bottom line for this particular question is clean and simple: a Roth IRA distribution can be deemed qualified when the account has been open for at least five years, and the account holder is permanently disabled. That combination earns you the tax- and penalty-free treatment you’d expect for a qualified distribution.

For readers curious about the broader landscape, these concepts connect to other familiar tax topics you’ll encounter in the same material—like how Roth rules contrast with traditional IRAs, or how other qualifying events function in practice. And if you ever wonder how these rules play out in a family budget or a retirement plan, you’re not alone—tax policy is, at its core, about giving people predictable rules to plan their lives around.

If you’re ever unsure about a specific situation, it’s a smart move to check the current IRS guidance or chat with a tax professional who can tailor the rules to your exact circumstances. The tax code isn’t a puzzle you solve once; it’s a living guide you refer to as life changes.

So, when someone asks you to identify the circumstance that makes Roth distributions qualified, you can answer with confidence: permanent disability, provided the five-year open period is met. And that’s not just textbook trivia—that’s real-world clarity you can use as you navigate retirement planning and beyond.