When can distributions from a Roth IRA be tax-free?

Distributions from a Roth IRA can be tax-free when two specific conditions are met: the account must be held for at least 5 years, and the taxpayer must be over 59½ years old. This rule ensures that the contributions to the account, as well as the earnings, are qualified for tax-free withdrawal.

The five-year holding period is crucial because it distinguishes between early withdrawals and those that can be made without incurring taxes or penalties. The age requirement further adds a layer of security, allowing the account holder to access their funds without penalties once they reach retirement age. Together, these criteria ensure that Roth IRAs can effectively serve as a tax-advantaged savings vehicle for retirement, rewarding taxpayers for long-term savings and investment.

Considering the other options, simply being over 60 years old does not automatically make the distributions tax-free if the five-year rule is not satisfied. An account balance exceeding $100,000 does not influence the tax treatment of distributions. Finally, while contributions can be withdrawn tax-free at any time, the earnings on those contributions are subject to specific conditions for tax-free treatment. Therefore, option B accurately reflects the requirements for tax-free distributions from a Roth IRA.