The basic withdrawal process

To withdraw money from your Roth IRA, you contact your financial institution — the bank, brokerage, or investment company that holds your account — and request a withdrawal. They will ask you which account to withdraw from, how much, and where to send the money. The institution then processes the request, which typically takes three to five business days. You receive the funds by check, electronic transfer, or direct deposit depending on what you choose.

The institution does not decide whether your withdrawal follows the rules. That responsibility falls on you. The IRS has specific rules about when you can withdraw money without penalty, and breaking those rules costs you money. Before you call to withdraw, you need to know whether your withdrawal will trigger taxes or penalties.

Key Takeaways

  • You can withdraw contributions (the money you put in) at any time without taxes or penalties, but earnings (investment gains) have strict rules about when they come out penalty-free.
  • Withdrawals before age 59½ from earnings are taxed as income and charged a 10 percent early withdrawal penalty unless you meet a narrow exception like disability or a first-time home purchase.
  • Your financial institution processes the withdrawal in three to five business days, but you must track and report the withdrawal correctly on your tax return.
  • The five-year rule requires that at least five tax years pass from when you first opened any Roth IRA before you can withdraw earnings tax-free, even if you are over 59½.
  • If you inherit a Roth IRA, different rules apply, and you should consult a tax professional before withdrawing.

Contributions versus earnings: what you can withdraw without penalty

A Roth IRA holds two types of money: contributions (the dollars you deposited) and earnings (investment gains on those dollars). The rules for withdrawing each are different.

You can withdraw your contributions at any time, at any age, without taxes or penalties. This is true even if you are 30 years old and withdraw money you put in at age 25. The IRS does not tax money you already paid taxes on when you earned it. Your financial institution will ask you to specify that you are withdrawing contributions, not earnings, so keep records of how much you have contributed over the years.

Earnings are different. If you withdraw earnings before age 59½, you owe federal income tax on them plus a 10 percent early withdrawal penalty — unless you meet one of the IRS exceptions. If you are 59½ or older and have held the account for at least five tax years, you can withdraw earnings tax-free and penalty-free.

The five-year rule for earnings

Even if you are over 59½, you cannot withdraw earnings without taxes and penalties unless your Roth IRA has been open for at least five tax years. This is called the five-year rule. The clock starts on January 1 of the first tax year you opened any Roth IRA, not the date you opened your current account.

If you opened your first Roth IRA on December 15, 2020, the five-year period began on January 1, 2020. By January 1, 2025, five tax years have passed, and you can withdraw earnings penalty-free if you are also 59½ or older. If you opened your first Roth IRA on March 1, 2024, the five-year period does not end until January 1, 2029.

The five-year rule applies separately to conversions. If you converted money from a traditional IRA to a Roth IRA, that conversion has its own five-year clock. You can withdraw the original contribution amount from the conversion anytime, but earnings on the conversion follow a separate five-year rule from the date of conversion.

Exceptions to the 10 percent penalty before age 59½

The IRS allows penalty-free withdrawals of earnings before age 59½ in specific situations. You still owe income tax on the earnings, but you avoid the 10 percent penalty. These exceptions are narrow and require documentation.

First-time home purchase: You can withdraw up to $10,000 of earnings (lifetime limit) to buy, build, or rebuild a primary residence. You must use the money within 120 days of withdrawal. "First-time" means you have not owned a home in the past two years.

Disability: If you become unable to work due to a physical or mental condition that is expected to last at least 12 months or result in death, you can withdraw earnings penalty-free. You will need medical documentation.

Medical expenses: You can withdraw earnings penalty-free to cover unreimbursed medical expenses that exceed 7.5 percent of your adjusted gross income in that year. The withdrawal must happen in the same year as the expense.

Health insurance premiums: If you are unemployed and have received unemployment benefits for at least 12 consecutive weeks, you can withdraw earnings penalty-free to pay health insurance premiums for yourself, your spouse, or dependents.

Substantially equal periodic payments: If you set up a series of equal payments based on your life expectancy, you can withdraw penalty-free before 59½. This is complex and requires IRS calculations; a tax professional should help you set this up.

How to tell your financial institution what you are withdrawing

When you request a withdrawal, your financial institution will ask you to specify whether you are withdrawing contributions or earnings. If you are withdrawing only contributions, state that clearly. If you are withdrawing more than your total contributions, the excess is treated as earnings and may be subject to taxes and penalties depending on your age and the five-year rule.

Some institutions use a default method called the pro-rata rule if you do not specify. Under this rule, each withdrawal is treated as a proportional mix of contributions and earnings based on your account balance. If your account is 60 percent contributions and 40 percent earnings, a $10,000 withdrawal is treated as $6,000 contributions and $4,000 earnings. This can trigger taxes and penalties on the earnings portion even if you intended to withdraw only contributions.

To avoid the pro-rata rule, put your withdrawal request in writing and explicitly state that you are withdrawing contributions first. Keep a copy of your request and the institution's confirmation.

Reporting the withdrawal on your tax return

Your financial institution will send you a Form 1099-R in January of the year after you withdraw. This form reports the total amount withdrawn. You must report this on your tax return using Form 8606 if any part of the withdrawal is earnings.

If you withdrew only contributions and are under 59½, you do not owe tax or penalty, but you still report the withdrawal. If you withdrew earnings and do not meet an exception, you owe income tax on the earnings at your regular tax rate plus the 10 percent penalty. If you meet an exception, you owe income tax but not the penalty — and you must document which exception applies.

Mistakes on this form are common and can result in the IRS assessing penalties you did not owe. If your withdrawal was complex — for example, if you withdrew earnings under the first-time home purchase exception — consider having a tax professional prepare your return.

Inherited Roth IRAs and special withdrawal rules

If you inherit a Roth IRA from someone other than a spouse, the withdrawal rules change significantly. You cannot simply leave the money in the inherited account indefinitely. Federal law now requires most non-spouse beneficiaries to withdraw the entire balance within 10 years of the account holder's death, though the timing of withdrawals within that 10-year window is flexible.

Spouse beneficiaries have more options: they can treat the inherited Roth as their own, roll it into their own Roth IRA, or keep it as an inherited account. The rules for each option differ. Because inherited accounts involve multiple moving parts and tax consequences, you should speak with a tax professional or financial advisor before making any withdrawal.

Frequently Asked Questions

Can I withdraw my contributions without reporting it to the IRS?

You must report all Roth IRA withdrawals on your tax return using Form 8606, even if you withdraw only contributions and owe no tax. Your financial institution sends Form 1099-R to both you and the IRS. Failing to report the withdrawal can trigger an audit or penalty.

What happens if I withdraw earnings before 59½ and do not meet an exception?

You owe federal income tax on the earnings at your regular tax rate plus a 10 percent early withdrawal penalty. If your tax bracket is 22 percent, you pay 32 percent total on the earnings withdrawn. Some states also tax the withdrawal. The penalty is calculated on the earnings amount, not the total withdrawal.

Does the five-year rule reset if I open a second Roth IRA?

No. The five-year rule is based on when you opened your first Roth IRA, not your current account. If you opened a Roth IRA in 2020 and open a second one in 2024, both accounts use the 2020 start date for the five-year rule. However, conversions from traditional IRAs have separate five-year clocks starting from the conversion date.

Can I withdraw money to pay off credit card debt?

You can withdraw contributions at any time without penalty. If you withdraw earnings before 59½, you owe income tax and a 10 percent penalty unless you meet one of the narrow IRS exceptions. Credit card debt does not may have access to as an exception, so withdrawing earnings for this purpose costs you significantly in taxes and penalties.

What if I made a mistake and withdrew the wrong amount or type of money?

You have 60 days to roll the money back into a Roth IRA to undo the withdrawal. This is called a rollover. After 60 days, the withdrawal is permanent and you owe taxes and penalties if applicable. If you made a mistake, act quickly and contact your financial institution immediately.