- Tax-deferred earnings: no tax assessed on them until year that the earnings are earned
- Withdrawals
- Of principal: can withdraw at any time for any purpose without having to pay taxes or penalties
- Qualifying distribution: tax-free if
- You are at least 59.5 years old, disabled, or use the funds to purchase a first home (up to $10k)
- The account has been open for at least 5 years
- Non-qualifying distribution
- Owe income taxes + 10% penalty on taxable portion of distribution
- Avoid at all costs
- Investment options
- No income tax deduction