You tell her the truth, as simply as possible, and only going into as much detail as she wants to know. The right age is now, because she is asking.
My first two were 8 when they asked. I told them that the mummy and daddy have a special cuddle, which is when the daddy plants a seed in the mummy, which then grows into a baby. Because of dc3 they already knew where the baby grows and how it comes out, so they worked out for themselves that the seed gets planted via the 'special hole', but when they realised what the daddy uses, they also thought it involved peeing.
I used simple language, and when they asked for more detail began using the proper names.
Ds1 enjoyed the discussion, dd was 'euww' 
But it's not one discussion, anyway. It's ongoing over days/weeks/months/even years. The important thing IMO is that there's just enough there to get them coming back for more. No embarrassment, no over-burdening with info.
TBH, and to my surprise, I really enjoyed these discussions and this opening my dcs minds.