Roth IRA earnings come out tax-free only if you meet two conditions

You can withdraw your Roth IRA earnings without paying income tax on them, but only if you satisfy two requirements: your account must be at least five years old, and you must be at least 59½ years old at the time of withdrawal. If you meet both conditions, the earnings are yours tax-free. If you do not meet both, you will owe federal income tax on the earnings you withdraw — though not on your contributions, which always come out tax-free.

The five-year rule starts on January 1 of the year you made your first Roth contribution, not the date you opened the account. This matters if you opened an account late in the year. If you contributed in December 2023, your five-year period ends on January 1, 2029, even though you contributed only weeks before the year ended.

The age requirement is straightforward: you must be 59½ or older. There is no exception for financial hardship or emergency. If you are 58 and withdraw earnings, you owe tax on them, regardless of why you need the money.

Key Takeaways

  • Roth IRA earnings withdraw tax-free only when your account is five years old and you are at least 59½ years old.
  • Your contributions always come out tax-free at any age, but earnings do not unless both conditions are met.
  • The five-year clock starts on January 1 of the year you first contributed, not the date you opened the account.
  • If you withdraw earnings before age 59½ or before five years have passed, you owe federal income tax on those earnings plus a 10 percent early withdrawal penalty in most cases.
  • Conversions from traditional IRAs to Roth IRAs have their own separate five-year rule for each conversion year.

What happens if you withdraw earnings too early

If you withdraw earnings before you turn 59½ or before your account reaches five years old, you owe income tax on the amount you withdraw. You also owe a 10 percent early withdrawal penalty on top of the tax, unless an exception applies.

The exceptions to the 10 percent penalty are narrow. You can avoid the penalty if you are disabled, if you are a beneficiary withdrawing after the account holder's death, if you use the money for may have access to higher education expenses, if you are a first-time homebuyer (up to $10,000 lifetime), or if you use the funds to pay unreimbursed medical expenses or health insurance premiums during unemployment. Even with these exceptions, you still owe income tax on the earnings — the penalty is waived, but the tax is not.

The IRS treats contributions and earnings separately when you withdraw. If your Roth IRA has $50,000 in contributions and $20,000 in earnings, and you withdraw $30,000, the first $30,000 comes from your contributions (tax-free). Only after your contributions are exhausted do withdrawals come from earnings.

How conversions create a separate five-year rule

If you convert money from a traditional IRA or 401(k) to a Roth IRA, that conversion has its own five-year holding period. The five-year clock for a conversion starts on January 1 of the year you converted, separate from the five-year clock for your regular Roth contributions.

This matters because you can have multiple five-year periods running at once. If you converted in 2021 and made a regular contribution in 2023, you have two separate five-year clocks: one ending January 1, 2026 (for the conversion) and one ending January 1, 2028 (for the contribution). Earnings from the 2021 conversion can come out tax-free starting January 1, 2026, even if your regular contributions have not yet reached five years.

The conversion five-year rule applies only to the earnings on the converted amount. The converted principal itself comes out tax-free at any time, just like your regular contributions. Only the growth on that converted money is subject to the five-year holding period.

The difference between the five-year rule and the age requirement

These are two separate gates, and you must pass through both. Meeting one does not waive the other. If your account is ten years old but you are 45, you cannot withdraw earnings tax-free. If you are 65 but your account is only two years old, you still cannot withdraw earnings tax-free.

The five-year rule is account-based: it depends on how long your Roth IRA has existed. The age requirement is person-based: it depends on your birthday. A married couple with identical Roth IRAs opened on the same day will have the same five-year date, but they will reach 59½ on different dates if they were born in different years.

What the IRS Form 5498 tells you about your five-year date

Your custodian (the bank or brokerage holding your Roth IRA) sends you a Form 5498 each year showing contributions and conversions. This form does not directly state your five-year date, but it records the year you first contributed or converted. You can use this to calculate when your five-year period ends: add five years to January 1 of the year shown on the form.

Keep copies of all your Forms 5498 if you have made contributions or conversions in different years. When you eventually withdraw, you will need to show the IRS (or your custodian) which contributions and conversions you made in which years, so the five-year rule can be applied correctly. If you cannot document when you contributed, the IRS will assume your earliest contribution date, which may work against you.

Frequently Asked Questions

Can I withdraw earnings tax-free if I am 59½ but my account is only three years old?

No. You must meet both conditions: the account must be five years old and you must be 59½. If your account is only three years old, earnings withdrawals are taxable and subject to the 10 percent early withdrawal penalty, even though you are old enough. You can withdraw your contributions tax-free at any time, but not the earnings.

Does the five-year rule reset if I close my Roth IRA and open a new one?

No. The five-year period is tied to your first Roth contribution ever, not to a specific account. If you close one Roth IRA and open another, the five-year clock does not restart. The IRS tracks this by your Social Security number, not by account number.

What if I roll over a Roth IRA from one custodian to another?

A rollover does not affect your five-year date. The five-year period continues from your original contribution date. Moving money between custodians is a transfer, not a new contribution, so the clock keeps running.

Do I have to withdraw earnings once I turn 59½ and reach five years?

No. There are no required minimum distributions from a Roth IRA during your lifetime, even after you turn 59½. You can leave the money in the account as long as you want. The five-year and age requirements simply determine whether you can withdraw earnings tax-free if you choose to.

If I have multiple Roth IRAs, do I have to track five years for each one separately?

No. The five-year rule applies to all your Roth IRAs combined. If you have three Roth IRAs and your first contribution to any of them was in 2020, all three accounts reach the five-year mark on January 1, 2025. You do not track separate five-year periods for each account.