A candidate sees a question about a 61-year-old taking a $20,000 distribution from her Roth IRA. She's over 59.5, so the candidate confidently selects "non-taxable." They get the question wrong. Why? They checked the age but missed the second requirement: the 5-year rule. This isn't just a missed point; it's a symptom of treating retirement rules as simple checkboxes instead of multi-part judgment calls, a mistake the exam is designed to punish.
Retirement distributions on the EA exam test the taxability of withdrawals from IRAs and qualified plans. You must master the two-part test for qualified Roth IRA distributions (age 59.5 and the 5-year rule), calculate Required Minimum Distributions (RMDs), and know the exceptions to the 10% early withdrawal penalty.
Key facts
- Exam Section: Special Enrollment Examination (SEE) Part 1: Individuals
- Governing Body: Internal Revenue Service (IRS)
- Relevant Code: IRC § 72(t), § 401(a)(9), § 408, § 408A
- RMD Age (as of 2026): 73 for those born 1951-1959; 75 for those born 1960 or later
- Early Withdrawal Penalty: 10% on premature distributions, subject to specific exceptions
- RMD Shortfall Penalty: 25% of the required amount not withdrawn (can be reduced to 10%)
Your 7-Day Sprint to Mastering Retirement Distributions
This topic is a test of precision and your ability to connect multiple rules under pressure. We'll treat this as a focused, seven-day sprint to get you exam-ready.
Day 1: What Are the Most Common Retirement Distribution Traps?
The first step is to understand why examiners love this topic. Retirement distributions appear on SEE Part 1 and test your ability to apply rules from IRC §408A (Roth IRAs) and §401(a)(9) (RMDs) to client scenarios.
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The single biggest mistake candidates make is applying one rule while ignoring another. They see the client is 60 and assume any Roth IRA withdrawal is tax-free. They see a rollover and forget to check if it violates the one-per-year rule for indirect rollovers. Try VoraPrep's free EA practice questions to see these traps in action.
Your job is to think like an examiner. Every fact in the question stem—an age, a date, an account type—is a potential trigger. Your brain needs to run a checklist:
- What type of account is it (Traditional IRA, Roth IRA, 401(k))?
- What is the client's age and birth year?
- When was the account first established or contributed to?
- What is the reason for the distribution?
Answering these four questions systematically will protect you from most common errors.
Day 2: What Are the Core Rules for Retirement Distributions?
Today is about building your foundation. Focus on the four pillars of retirement distributions. Don't just read them; write them down and create your own reference sheet.
1. Roth IRA Qualified Distributions A distribution from a Roth IRA is tax-free and penalty-free only if it's a "qualified distribution." This requires passing a two-part test.- Part 1 (The 5-Year Rule): At least five tax years have passed since January 1 of the year you made your first-ever contribution to any Roth IRA.
- Part 2 (The Triggering Event): The distribution is made after you turn age 59½, or because of disability, death, or for a first-time home purchase (up to a $10,000 lifetime limit).
If a distribution fails either part, it's non-qualified. For non-qualified distributions, contributions are returned first (tax-free), and then earnings are distributed (taxable and potentially subject to penalty).
A key exam trap is forgetting that beneficiaries of Roth IRAs are subject to distribution rules, unlike the original owner. Under the SECURE Act, most non-spouse beneficiaries must empty the account within 10 years.
2. Required Minimum Distributions (RMDs) The IRS requires individuals to start taking withdrawals from their traditional IRAs and most other retirement plans. The RMD age depends on the individual's birth year.| Birth Year | RMD Age Begins |
|---|---|
| 1950 or earlier | 72 |
| 1951 - 1959 | 73 |
| 1960 or later | 75 |
- First RMD Deadline: April 1 of the year after the year the individual reaches their RMD age.
- Subsequent RMD Deadline: December 31 of each year.
- Calculation: RMD = (Account Balance on Dec 31 of prior year) / (Distribution Period factor from IRS Uniform Lifetime Table).
- "Still Working" Exception: An individual can delay RMDs from their current employer's qualified plan (like a 401(k)) if they are still working, are not a 5% owner of the company, and the plan allows it. This exception does not apply to IRAs.
| Exception Category | Key Details |
|---|---|
| Disability | Must meet the IRS definition of totally and permanently disabled. |
| Death | Distributions to a beneficiary are not penalized. |
| Medical Expenses | To the extent they exceed 7.5% of Adjusted Gross Income (AGI). |
| Health Insurance | For premiums while unemployed for 12+ consecutive weeks. |
| Higher Education | For qualified expenses for you, your spouse, children, or grandchildren. |
| First-Time Homebuyer | Up to $10,000 (lifetime limit). |
- Direct Rollover (Trustee-to-Trustee): The funds move directly between financial institutions. This is the safest method and is not subject to the one-rollover-per-year rule. You can do an unlimited number of these.
- Indirect Rollover (60-Day): You receive a check and have 60 days to deposit it into another retirement account. You can only do one such IRA-to-IRA rollover in any 12-month period. This rule is a classic exam trap.
Day 3: How Do I Apply These Rules to an Exam Question?
Let's apply these rules to a realistic exam-style problem. This is where you move from memorization to judgment.
Scenario: Carla, age 74, has two retirement accounts.- A traditional IRA with a balance of $820,000 on December 31, 2024.
- A Roth IRA she first contributed to on March 15, 2022, with a balance of $50,000 ($40,000 in contributions, $10,000 in earnings).
In 2025, she takes a $40,000 distribution from her traditional IRA and a $15,000 distribution from her Roth IRA. The IRS Uniform Lifetime Table factor for a 75-year-old (her age at the end of 2025) is 24.6. What is the tax consequence of her 2025 distributions?
Stop. Before you calculate, think. What rules are being tested?- RMD calculation for the traditional IRA.
- Potential RMD shortfall penalty.
- Taxability of the traditional IRA distribution.
- Qualified vs. Non-qualified Roth IRA distribution rules.
- Prior Year-End Balance (Dec 31, 2024): $820,000
- Age at Year-End 2025: 75
- Uniform Lifetime Table Factor for age 75: 24.6
- RMD = $820,000 / 24.6 = $33,333.33
- Is there a penalty? No, she met and exceeded her RMD.
- What is the taxable amount? The entire $40,000 is taxable as ordinary income, assuming all contributions were deductible.
- Part 1 (Triggering Event): Carla is 74, which is over 59.5. She passes this part.
- Part 2 (5-Year Rule): She made her first contribution in 2022. The 5-year period begins on January 1, 2022. The five tax years are 2022, 2023, 2024, 2025, and 2026. The 5-year period is not met until the end of 2026. She fails this part.
Because the distribution is non-qualified, we must determine the taxability. Roth IRA distributions are ordered: contributions first, then earnings.
- Total distribution: $15,000
- Total contributions: $40,000
- The $15,000 distribution is considered a return of her contributions, which is tax-free and penalty-free.
This type of multi-step analysis is exactly what you'll face. The VoraPrep adaptive learning engine identifies if you're struggling with these multi-rule scenarios and gives you more practice until you master them.
Day 4: How Can I Test My Knowledge with Practice Questions?
Theory is good, but active recall is better. It's time to test your knowledge with exam-style questions. VoraPrep has over 3,000 questions that mirror the real exam.
Here are a few samples to try right now.
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> Explanation: The distribution is fully taxable as ordinary income. However, the use of funds for qualified higher education expenses is a valid exception to the 10% early withdrawal penalty under IRC § 72(t). Therefore, Jack only owes income tax. Tax = $20,000 * 22% = $4,400. > The correct answer is A. The trap answer is B, which incorrectly adds the $2,000 (10%) penalty.
Sample Question 2: Mel turned 74 in 2025 and has a traditional IRA with a balance of $500,000 on December 31, 2024. The Uniform Lifetime Table factor for a 74-year-old is 25.5. He fails to take any distribution during 2025. What is the amount of the penalty he owes?> Explanation: First, calculate the RMD. RMD = $500,000 / 25.5 = $19,607.84. Since he took no distribution, the shortfall is the full RMD amount. The penalty is 25% of the shortfall. Penalty = $19,607.84 * 25% = $4,901.96. The question doesn't state he corrected it, so we use the 25% rate. > The correct answer is A. Note how the exam may use very similar numbers to trick you. Answer B is a rounding difference, C is the RMD itself, and D is half the RMD.
Sample Question 3: Nina, age 62, takes a $30,000 distribution from her Roth IRA during the 2025 tax year. She established and made her first contribution to the Roth IRA in 2018. Her account has a basis of $50,000 and earnings of $15,000. How much of the distribution is taxable?> Explanation: We must run the two-part test for a qualified distribution. Part 1 (Triggering Event): Nina is 62 (over 59.5). Pass. Part 2 (5-Year Rule): Her first contribution was in 2018. The 5-year clock started Jan 1, 2018. The five years (2018-2022) are complete by Jan 1, 2023. Pass. Since it's a qualified distribution, the entire amount is tax-free. > The correct answer is A.
You can practice more questions like these in VoraPrep to build your speed and confidence.
Day 5-7: How Do Retirement Distributions Affect a Tax Return?
In your final days of studying this topic, focus on how it connects to the bigger picture. A taxable distribution from a traditional IRA increases a taxpayer's Adjusted Gross Income (AGI). This can have ripple effects, such as phasing out other tax benefits. Understanding how these distributions impact above-the-line deductions is crucial for complex questions.
Your final review should focus on the numbers:
- Age triggers: 59.5 (penalty), 73/75 (RMDs).
- Time limits: 60 days (indirect rollover), 5 years (Roth qualified), 10 years (beneficiary rule).
- Penalty rates: 10% (early withdrawal), 25% (RMD shortfall).
- Dollar limits: $10,000 (first-time homebuyer).
Create flashcards for these specific figures. On exam day, when you see a question about retirement, take a deep breath and run through your mental checklist. Identify the correct rule before you start calculating.