Most Roth IRA withdrawals are tax-free, but some are not
Withdrawals from a Roth IRA are tax-free if you meet two conditions: you are 59½ years old or older, and the account has been open for at least five tax years. If you withdraw money before meeting both conditions, you will owe federal income tax on the earnings portion of that withdrawal — though not on the contributions you put in yourself.
The five-year rule applies to each Roth IRA separately. If you open a second Roth IRA three years later, that second account has its own five-year clock. The rule also applies to conversions: if you convert money from a traditional IRA to a Roth, that converted amount has its own five-year waiting period before you can withdraw it without tax consequences.
Contributions you made directly to a Roth IRA can always be withdrawn tax-free, at any age, regardless of how long the account has been open. The tax consequences apply only to the earnings — the investment gains that accumulated inside the account.
Key Takeaways
- Contributions you deposited yourself can be withdrawn at any time without tax or penalty.
- Earnings are tax-free only if you are 59½ or older and the account has been open for at least five tax years.
- Withdrawing earnings before age 59½ triggers federal income tax on that amount, plus a 10 percent early withdrawal penalty in most cases.
- Conversions from traditional IRAs to Roth IRAs have their own five-year rule separate from the original account's clock.
- Certain hardships — disability, medical expenses, first-time home purchase — can waive the 10 percent penalty but not the income tax on earnings.
The difference between contributions and earnings
Your Roth IRA contains two parts: the money you put in (contributions) and the money that account earned through investment growth (earnings). The IRS treats these differently when you withdraw.
Contributions are always yours to take out. If you deposited $5,000 per year for five years, you can withdraw that $25,000 at any time without owing tax or penalty. The IRS knows how much you contributed because you report it on your tax return when you make the deposit.
Earnings are the investment gains on top of your contributions. If your $25,000 in contributions grew to $35,000, the $10,000 in earnings is what triggers tax consequences if you withdraw before 59½. The IRS calculates what portion of your withdrawal is earnings using a pro-rata formula: if your account is 70 percent contributions and 30 percent earnings, then 30 percent of any withdrawal is treated as earnings.
What happens if you withdraw before age 59½
Withdrawing earnings before age 59½ means you owe federal income tax on that amount at your ordinary tax rate. If you are in the 22 percent tax bracket and withdraw $10,000 in earnings, you will owe $2,200 in federal income tax.
You will also owe a 10 percent early withdrawal penalty on the earnings portion — an additional $1,000 in the example above. That penalty goes to the IRS on top of the income tax. Some states also tax Roth IRA withdrawals, so your total bill could be higher.
The penalty does not apply to contributions, only to earnings. If you withdraw $10,000 and $6,000 is contributions and $4,000 is earnings, you owe the 10 percent penalty only on the $4,000.
Exceptions to the early withdrawal penalty
The IRS waives the 10 percent penalty in specific situations, though you still owe income tax on the earnings. These exceptions include disability, medical expenses over 7.5 percent of your adjusted gross income, health insurance premiums while unemployed, and a first-time home purchase (up to $10,000 lifetime).
A first-time home buyer exception lets you withdraw up to $10,000 in earnings penalty-free if you have not owned a home in the past two years. You still pay income tax on that $10,000, but not the 10 percent penalty. This limit is per person and applies across all your IRAs combined, not per account.
Substantially equal periodic payments (SEPPs) also avoid the penalty. If you set up a payment schedule based on your life expectancy and follow it exactly, you can withdraw from your Roth without penalty before 59½. This is complex and requires IRS-approved calculation methods, so consult a tax professional if you are considering this route.
The five-year rule for conversions
If you convert money from a traditional IRA to a Roth IRA, that converted amount sits under its own five-year rule. You cannot withdraw the converted funds without penalty until five tax years have passed, even if your original Roth IRA has been open longer.
The five-year clock for a conversion starts on January 1 of the year you do the conversion. If you convert in March 2024, the five-year period ends on December 31, 2028. You can withdraw that converted amount penalty-free starting January 1, 2029, as long as you are 59½ or older.
Contributions to that same Roth IRA are still withdrawable at any time. Only the converted funds have the separate five-year waiting period. If you convert $50,000 and contribute $10,000 directly, you can withdraw the $10,000 anytime, but the $50,000 conversion is locked until five years pass.
How the five-year rule works across multiple accounts
Each Roth IRA has its own five-year clock. If you open a Roth IRA in 2024 and another in 2027, the first account's five-year period ends in 2028, but the second account's does not end until 2031. You can withdraw earnings from the first account tax-free starting in 2029 (if you are 59½), but earnings from the second account remain taxable until 2032.
Conversions also have separate five-year clocks from the account itself. If you open a Roth IRA in 2024 and convert funds into it in 2026, the account's five-year rule started in 2024, but the conversion funds have their own five-year rule that started in 2026. The earnings on the original account become tax-free in 2029, but the converted funds cannot be withdrawn penalty-free until 2031.
This matters if you are managing multiple Roth accounts or have done conversions at different times. Track the opening date of each account and the date of each conversion separately.
Inherited Roth IRAs and beneficiary withdrawals
If you inherit a Roth IRA from someone else, the five-year rule still applies to the earnings, but it is based on when the original account owner opened the account, not when you inherited it. If the account has been open for five years or more, you can withdraw earnings tax-free immediately, regardless of your age.
If the account has been open for fewer than five years, you owe income tax on any earnings you withdraw, though the 10 percent early withdrawal penalty does not apply to beneficiaries. The contributions in an inherited Roth can always be withdrawn tax-free.
The rules for inherited Roth IRAs changed in 2024 under the SECURE 2.0 Act. Most non-spouse beneficiaries must now withdraw the entire account within 10 years, though the timing of withdrawals within that 10-year window is flexible. Consult a tax professional about your specific situation, as the rules vary by beneficiary type.
Frequently Asked Questions
Can I withdraw my contributions without paying tax?
Yes. Contributions you made directly to a Roth IRA can be withdrawn at any time, at any age, without owing federal income tax or penalty. The IRS does not tax money you already paid tax on when you earned it. Only the earnings portion of your account triggers tax consequences.
What if I need money before 59½ but do not may have access to for an exception?
You can withdraw your contributions anytime without penalty. If you need to withdraw earnings and do not meet an exception, you will owe income tax on that amount plus a 10 percent penalty. Some people withdraw contributions first to cover expenses, leaving earnings untouched until they reach 59½.
Does the five-year rule reset if I close and reopen a Roth IRA?
No. The five-year rule is based on when you first opened any Roth IRA, not on individual accounts. If you opened a Roth in 2022, closed it in 2024, and opened a new Roth in 2025, the five-year period still ends in 2027 based on your original 2022 opening date. Rolling over or transferring between Roth accounts does not reset the clock.
Do I have to pay state income tax on Roth withdrawals?
It depends on your state. Most states do not tax Roth IRA withdrawals, but some do. Check your state's tax rules or consult a tax professional if you live in a state with income tax. The federal rules described here apply everywhere, but state rules vary.
What if I made a mistake and withdrew too much too early?
You can put the money back into a Roth IRA within 60 days in most cases, which is called a rollover. This does not undo the tax consequences if you already filed your tax return, but it stops additional penalties from accruing. If you have already filed, you may need to file an amended return. Consult a tax professional about your specific withdrawal.