A qualified distribution from a qualified retirement plan such as a 401(k) or 403(b) plan is a tax- and penalty-free withdrawal which follows conditions as set by the Internal Revenue Service (IRS). These conditions must be followed in order for the withdrawal to remain free of tax liability and penalties.

In general, for a distribution to be considered qualified, the account holder must be at least 59½ years old at the time of the withdrawal. This age requirement applies to both traditional pre-tax retirement accounts such as 401(k)s and 403(b)s, as well as Roth IRAs. Additionally, for Roth IRAs, the account must have been open and funded for a minimum five-year period based on the tax year of the initial funding.

If the withdrawal is not a qualified distribution, or if the retirement plan participant is not over the age limit, then the withdrawal is considered non-qualified. Any taxable portions in a non-qualified distribution are subject to the 10% early withdrawal penalty by the IRS, on top of the regular income tax.

Those wishing to make a qualified distribution should thoroughly understand the IRS rules and requirements. Understanding the different rules that apply to different types of accounts and age groups will help investors make informed decisions that could save them from costly penalties and taxes.