You don't pay taxes on Roth IRA withdrawals in retirement, but the rules depend on how long you've held the account

The core answer is simple: once you reach retirement age and meet the account's holding period, you withdraw money from a Roth IRA tax-free. The IRS doesn't tax your withdrawals or the earnings that built up inside the account. But there are conditions. You must be 59½ or older, and the account must have been open for at least five tax years. If you withdraw before meeting both conditions, you'll owe taxes and penalties on the earnings portion.

The money you originally contributed — the amount you put in from your own pocket — can always come out tax-free and penalty-free, even before 59½. It's the earnings (the growth your money made) that triggers taxes and penalties if you pull them out early. Understanding which part is which matters because the IRS tracks them separately.

Key Takeaways

  • Withdrawals from a Roth IRA are tax-free in retirement if you're 59½ or older and the account has been open for at least five tax years.
  • Money you contributed yourself can be withdrawn anytime without taxes or penalties, but earnings withdrawn before 59½ face a 10% penalty plus income tax.
  • The five-year rule applies to each Roth IRA separately, so opening a new account restarts the clock.
  • Certain hardships like disability, medical expenses, or first-time home purchase may let you withdraw earnings early without the 10% penalty, though income tax still applies.

How the five-year rule works

The five-year holding period is a calendar rule, not based on your age. It starts on January 1 of the tax year in which you open the account or make your first contribution. If you opened a Roth IRA in March 2024, the five-year period began on January 1, 2024. After five tax years pass — meaning January 1, 2029 — you've satisfied the holding requirement.

This rule applies to each Roth IRA separately. If you have multiple Roth accounts, each one has its own five-year clock. If you roll over money from another Roth IRA into a new one, the five-year period doesn't restart — the original account's opening date is what counts. But if you convert a traditional IRA to a Roth (a conversion), that conversion starts a new five-year period for the converted funds specifically.

The five-year rule is separate from the age requirement. You need both conditions met: you must be 59½ or older AND the account must have been open for five tax years. If you're 60 but your Roth IRA is only three years old, earnings withdrawals still face the 10% penalty.

Contributions versus earnings: what's taxable

The IRS divides your Roth IRA balance into two parts: contributions (money you put in) and earnings (growth and investment gains). Contributions always come out tax-free and penalty-free, regardless of your age or how long you've held the account. This is a major advantage of Roth accounts — you can access your own money without consequence.

Earnings are different. If you withdraw earnings before 59½, you owe income tax on them plus a 10% early withdrawal penalty. If you withdraw earnings after 59½ but before the five-year rule is satisfied, you owe income tax but not the 10% penalty. Only when both conditions are met — age 59½ and five tax years — do earnings come out completely tax-free.

The IRS uses a specific order when you withdraw: contributions come out first, then earnings. So if your Roth IRA has $50,000 in contributions and $15,000 in earnings, and you withdraw $40,000, the first $40,000 is treated as contributions and comes out tax-free. The earnings stay in the account.

Early withdrawal exceptions that waive the 10% penalty

The IRS allows certain hardships to let you withdraw earnings before 59½ without the 10% penalty, though income tax still applies. These exceptions include disability, medical expenses that exceed 7.5% of your adjusted gross income, health insurance premiums while unemployed, and a first-time home purchase (up to $10,000 lifetime).

Substantially equal periodic payments (SEPP) is another exception. If you set up a specific payment schedule based on your life expectancy, you can withdraw from your Roth before 59½ without the 10% penalty. The payments must continue for at least five years or until you turn 59½, whichever is longer. This is complex and requires IRS-approved calculation methods, so work with a tax professional if you're considering it.

Even with these exceptions, you still owe income tax on the earnings portion. The penalty is waived, but the tax bill remains. And contributions always come out first, so you may not hit the earnings portion at all depending on your balance.

What happens if you inherit a Roth IRA

If you inherit a Roth IRA from someone else, the tax treatment depends on whether you're a spouse or a non-spouse beneficiary. A surviving spouse can treat the inherited Roth as their own, which means they follow the normal rules: contributions out anytime tax-free, earnings tax-free after 59½ and five tax years from the original account opening.

Non-spouse beneficiaries face different rules. You must withdraw the entire balance within ten years of the account holder's death (under current law). Contributions come out tax-free, but earnings are taxable when withdrawn. The five-year rule still applies — if the original account owner hadn't satisfied it before death, you'll owe tax on earnings even if you withdraw within the ten-year window.

Roth conversions and their own five-year rule

If you convert money from a traditional IRA to a Roth, that conversion starts a separate five-year period for the converted funds. You can withdraw your original contributions from the Roth anytime tax-free, but converted funds follow a different rule. The converted amount itself (not earnings on it) can be withdrawn after five tax years without penalty, but income tax applies if you're under 59½.

This matters if you do a large conversion and then need the money back quickly. The conversion amount is locked behind the five-year rule and the age 59½ rule. Earnings on the converted funds follow the same rules as earnings on regular contributions. Work with a tax professional before converting if you think you might need the money within five years.

State taxes on Roth IRA withdrawals

Most states don't tax retirement income, including Roth IRA withdrawals, but a few do. States like Vermont, Minnesota, and New Jersey tax some retirement income depending on your total income and filing status. Federal tax rules don't automatically apply to state tax, so check your state's specific rules if you live in a state with an income tax.

If you move states after retiring, your new state's rules apply going forward. Some states exempt retirement income entirely, which can be a significant advantage if you're planning where to retire. Your tax professional or state tax authority can tell you whether your state taxes Roth withdrawals.

Frequently Asked Questions

Can I withdraw my contributions before 59½ without paying taxes?

Yes. Contributions (the money you put in) can be withdrawn anytime, at any age, without taxes or penalties. Only earnings face the 10% penalty and income tax if withdrawn before 59½. This is one of the main benefits of a Roth IRA — your own money is always accessible.

What if I need money before the five-year rule is satisfied?

Withdraw your contributions first — they're always tax and penalty-free. If you need more than you've contributed, you'll owe income tax and a 10% penalty on the earnings portion, unless you meet a hardship exception like disability or a first-time home purchase.

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

Yes. Each Roth IRA has its own five-year clock starting from January 1 of the tax year you open it. If you close one account and open another, the new account's five-year period begins fresh. However, rolling money from one Roth to another doesn't restart the clock — the original opening date is what matters.

Do I have to pay taxes on Roth IRA earnings if I'm over 59½ but haven't held the account five years?

Yes, you owe income tax on earnings, but not the 10% penalty. You need both conditions: 59½ or older AND five tax years. If only one is met, earnings are taxable. Contributions always come out tax-free regardless.

What if I convert a traditional IRA to a Roth — do I pay taxes on that conversion?

Yes. When you convert, you owe income tax on the amount converted in that tax year. The conversion itself is a taxable event. After conversion, the five-year rule applies to those converted funds separately, and you can withdraw the conversion amount after five tax years without penalty (though you still owe income tax if under 59½).