Indeed, this is the primary benefit of owning a Roth IRA. While you can always take money from a Roth IRA at any time, penalties and/or taxes may be assessed depending on when the distribution is made and from what kind of contribution it came. Roth IRAs can be made up of three components: annual contributions, amounts converted from traditional IRAs or qualified plans, and earnings. Here’s how the IRS breaks down Roth contributions: Annual contributions Distributions from a Roth IRA are presumed to come first from annual contributions.
When you take a distribution from a Roth IRA, you can’t just decide which component you are taking. These amounts are not subject to tax or penalty no matter when they are taken.
Some people are so in love with their Roth IRAs that they plan never to take the money out.
The very thought of sitting on a pile of assets that can be accessed at any time without tax consequences is just too good to ruin.
Also, keep in mind that all Roth IRAs are aggregated for the purpose of these ordering rules.