What is the tax treatment of Pamelia's distribution from her Roth IRA when she withdraws $7,000 at age 60?

The tax treatment of distributions from a Roth IRA is governed by specific rules that determine whether a withdrawal is taxable or incurs penalties. In Pamelia's case, she is 60 years old and withdrawing $7,000 from her Roth IRA.

Roth IRA distributions consist of both contributions and earnings. The key point here is that contributions to a Roth IRA can always be withdrawn tax-free and penalty-free at any time. Additionally, once the account holder reaches age 59½ and has met the requirement of having the account open for at least five years, any earnings carried within the account can also be withdrawn tax-free.

Given that Pamelia is 60, she is beyond the minimum age requirement, and assuming she has satisfied the five-year holding period for her Roth IRA, her distribution of $7,000 is entirely tax-free. This means that neither the contributions nor the earnings will be subject to income tax or penalties. Therefore, the withdrawal is classified as tax-free. This aligns perfectly with the rules governing Roth IRA distributions.