Roth IRA withdrawals are usually tax-free, but the rules depend on what you withdraw and how long you've held the account
The short answer: money you contributed to a Roth IRA comes out tax-free at any time. Earnings (the investment gains) come out tax-free only if you're 59½ or older and have held the account for at least five tax years. If you withdraw earnings before meeting both conditions, you owe income tax on those earnings plus a 10% early withdrawal penalty in most cases.
The IRS treats Roth contributions and earnings differently because contributions are made with after-tax dollars you've already paid tax on. Earnings are the growth that happened inside the account, and the Roth's main benefit is that this growth never gets taxed if you follow the rules.
Key Takeaways
- Contributions you put into a Roth IRA always come out tax-free, no matter your age or how long you've owned the account.
- Earnings are taxed as income and hit with a 10% penalty if you withdraw before age 59½, unless you meet a narrow exception.
- The five-tax-year rule starts from January 1 of the year you made your first Roth contribution, not from the contribution date itself.
- If you have multiple Roth IRAs, the five-year rule applies to your first Roth IRA across all of them, not separately to each account.
- Roth conversions (money moved from a traditional IRA) have their own five-year rule that runs separately from contributions.
How the IRS decides what portion is taxable when you withdraw
The IRS uses a specific order to determine what money leaves your Roth IRA first. Contributions come out first, then earnings, then any converted money. This matters because only earnings and conversions can trigger tax and penalties.
If you have $50,000 in a Roth IRA made up of $30,000 in contributions and $20,000 in earnings, and you withdraw $35,000, the first $30,000 is your contributions (tax-free) and the remaining $5,000 comes from earnings (potentially taxable). The IRS calls this the "ordering rule," and it applies whether you have one Roth IRA or several.
If you own multiple Roth IRAs, the IRS treats them as one account for this calculation. You add up all contributions, all earnings, and all conversions across every Roth you own, then apply the ordering rule to your total withdrawal. This prevents people from sheltering earnings by splitting accounts.
Withdrawals before age 59½: when you owe tax and penalty
If you withdraw earnings before you turn 59½, you owe income tax on those earnings at your regular tax rate. You also owe a 10% early withdrawal penalty on the earnings portion unless you meet an exception.
The exceptions that waive the 10% penalty (but not the income tax) include: disability, medical expenses over 7.5% of your adjusted gross income, health insurance premiums while unemployed, a series of equal periodic payments, first-time home purchase (up to $10,000 lifetime), education expenses, and birth or adoption expenses (up to $35,000 lifetime). Contributions always come out penalty-free, so these exceptions only matter if you're touching earnings.
If you withdraw $10,000 in earnings at age 45 with no exception, you owe income tax on the full $10,000 plus $1,000 in penalty. The tax rate depends on your total income that year and your tax bracket.
The five-tax-year rule and when it starts
To withdraw earnings tax-free, you must have held a Roth IRA for at least five tax years. The clock starts on January 1 of the tax year in which you made your first Roth contribution, not on the date you actually contributed the money.
If you opened a Roth IRA and contributed $7,000 on December 15, 2024, your five-year period began on January 1, 2024. You can withdraw earnings tax-free starting January 1, 2029, assuming you're also 59½ by then. If you had contributed on January 2, 2024 instead, the clock still starts January 1, 2024.
The five-year rule applies to your first Roth IRA across all Roth accounts you own. If you opened a second Roth IRA three years after your first, you don't restart the clock. Both accounts use the same five-year start date based on when you first contributed to any Roth.
Roth conversions have a separate five-year rule
If you convert money from a traditional IRA or 401(k) to a Roth IRA, that converted money follows its own five-year rule. You can withdraw the amount you converted tax-free after five tax years, but the earnings on that conversion are subject to the same age 59½ and five-year rules as regular contributions.
Conversions also trigger a pro-rata rule: if you convert a traditional IRA that holds both pre-tax and after-tax money, a portion of the conversion is treated as taxable income in the year you convert. This is separate from the withdrawal rules and happens at conversion time, not withdrawal time.
If you converted $50,000 from a traditional IRA to a Roth in 2024, you can withdraw that $50,000 tax-free starting in 2029. Any earnings that accumulated on that $50,000 inside the Roth follow the standard rules: tax-free only if you're 59½ and the five-year period has passed.
What happens if you don't meet the five-year requirement
If you withdraw earnings before the five-year period ends, even if you're 59½ or older, you owe income tax on those earnings. The 10% early withdrawal penalty does not apply once you reach 59½, but the income tax still does.
This is a common mistake: people assume that turning 59½ means all Roth withdrawals are tax-free. That's true for contributions, but earnings still need the five-year holding period. If you're 62 and withdraw earnings from a Roth you opened four years ago, you owe income tax on those earnings even though you're past 59½.
Inherited Roth IRAs and special withdrawal rules
If you inherit a Roth IRA from someone other than a spouse, the five-year rule still applies to earnings, but it's based on the original account owner's five-year start date, not yours. You can withdraw contributions tax-free immediately, but earnings follow the original timeline.
Spouses who inherit a Roth IRA can treat it as their own, which means the five-year rule resets based on when the spouse first contributed to any Roth. Non-spouse beneficiaries must take distributions according to the SECURE Act rules, which generally require the account to be emptied within 10 years.
Frequently Asked Questions
Can I withdraw my contributions without penalty at any age?
Yes. Contributions always come out tax-free and penalty-free, regardless of your age or how long you've owned the account. The IRS considers contributions already-taxed money, so there's no tax event when you withdraw them.
What if I need money before 59½ but don't have an exception?
You can withdraw contributions penalty-free. If you need to touch earnings, you'll owe income tax and the 10% penalty unless you meet one of the narrow exceptions (disability, medical expenses, first-time home purchase, education, birth/adoption). Withdrawing only contributions is often the best option if you need cash early.
Do I have to report Roth withdrawals on my tax return?
If you're only withdrawing contributions, you don't report anything. If you withdraw earnings, you report the taxable portion on Form 8606 and include it in your income. Your Roth custodian will send you a Form 1099-R showing the total withdrawal amount, but it's your responsibility to calculate and report the taxable portion correctly.
What if I have both a Roth IRA and a Roth 401(k)?
They're separate accounts with separate rules. The five-year rule for a Roth 401(k) is based on when you first contributed to that specific plan, not your Roth IRA. Withdrawals from a Roth 401(k) follow the plan's rules, which may be stricter than Roth IRA rules. Consult your plan documents or the plan administrator for specifics.
If I withdraw earnings by mistake, can I put the money back?
You can return the money to the Roth within 60 days, but you'll still owe tax on the earnings for that year unless you file an amended return claiming a correction. The penalty may be waived if you correct the error quickly, but the income tax is harder to escape. Contact a tax professional if this happens.