What happens to non-qualified withdrawals from a Roth IRA made before age 59 1/2?

Non-qualified withdrawals from a Roth IRA made before age 59 1/2 typically incur a 10% penalty and are subject to taxes on the earnings. This is because the IRS stipulates that contributions to a Roth IRA can be withdrawn at any time without penalty, but the earnings on those contributions are only available tax-free under qualifying circumstances, which generally include reaching the age of 59 1/2 and having the account open for at least five years.

When an account holder makes a withdrawal that does not meet these criteria, the portion that reflects earnings, as opposed to contributions, is subject to regular income tax. Additionally, a penalty is applied to the withdrawal of earnings, making it essential for account holders to understand these ramifications when considering early withdrawals from their Roth IRAs.

Considering this, the understanding of penalties and taxes associated with non-qualified withdrawals is fundamental for managing retirement accounts effectively. The facts surrounding contributions, earnings, and the consequences of early withdrawal provide a critical framework for financial planning and retirement strategy.