The basic rule: contributions come out tax-free, earnings do not

You can withdraw the money you put into a Roth IRA at any time without penalty or taxes. The money you earn inside the account — interest, dividends, capital gains — is different. If you withdraw earnings before age 59½ and before the account has been open for five years, you pay income tax on those earnings plus a 10 percent penalty.

The IRS separates your Roth into two parts: your basis (what you contributed) and your earnings (what the money made). When you withdraw, the IRS assumes you take out contributions first. Once contributions are gone, any additional withdrawal counts as earnings and triggers the tax and penalty unless an exception applies.

Key Takeaways

  • You can withdraw contributions you made to a Roth IRA anytime without tax or penalty, regardless of your age.
  • Withdrawing earnings before age 59½ costs you income tax plus a 10 percent penalty, unless a specific exception applies.
  • The five-year rule means the account must have been open for at least five tax years before you can withdraw earnings penalty-free at age 59½.
  • Exceptions to the penalty include disability, medical expenses over 7.5 percent of income, and first-time home purchase (up to $10,000 lifetime).
  • The IRS tracks your total Roth basis across all your Roth accounts, so you cannot avoid the rule by opening multiple accounts.

How the five-year rule works

The five-year clock starts on January 1 of the year you make your first contribution to any Roth IRA. It does not matter if you contribute $100 or $7,000 — the clock starts. After five tax years have passed, you can withdraw earnings without the 10 percent penalty if you are also age 59½ or meet an exception.

The five-year rule applies separately to conversions. If you convert a traditional IRA to a Roth, that conversion has its own five-year clock. You can withdraw the amount you converted without penalty after five years, but earnings on that conversion are still subject to the penalty if you are under 59½.

Example: You open a Roth IRA on March 15, 2024, and contribute $6,500. The five-year period runs from January 1, 2024, through December 31, 2028. On January 1, 2029, you can withdraw earnings without the 10 percent penalty if you are 59½ or older.

Exceptions that waive the 10 percent penalty

The IRS allows early withdrawal of earnings without the 10 percent penalty in these situations: you are disabled, you are a beneficiary withdrawing after the account holder's death, you have unreimbursed medical expenses over 7.5 percent of your adjusted gross income, you are paying health insurance premiums while unemployed, or you are a first-time homebuyer taking up to $10,000 lifetime.

The disability exception requires that you be unable to work due to a physical or mental condition expected to last at least 12 months or result in death. You do not need to be on Social Security Disability Insurance, but the IRS can ask for medical evidence. The medical expense exception covers costs you paid but did not reimburse through insurance or other means.

The first-time homebuyer exception is a one-time $10,000 limit across your lifetime, not per year or per account. You must use the money within 120 days of withdrawal to buy, build, or rebuild a home, and you must not have owned a home in the two years before the withdrawal.

What taxes you owe if you do not meet an exception

If you withdraw earnings before age 59½ and the account has not been open five years, you owe two things: ordinary income tax on the earnings at your regular tax rate, plus a 10 percent penalty on the earnings only. The penalty is calculated on the earnings amount, not your total withdrawal.

Example: Your Roth IRA has $8,000 in contributions and $2,000 in earnings. You withdraw $5,000 at age 45, and the account is three years old. The first $5,000 comes from contributions (no tax, no penalty). If you withdraw another $1,000, that $1,000 is earnings. You owe income tax on $1,000 plus $100 in penalty (10 percent of $1,000).

You report the withdrawal on Form 8606 when you file your tax return. The IRS will send you a Form 1099-R showing the distribution. If you do not report it correctly, the IRS can assess the penalty and interest on top of the tax you owe.

The pro-rata rule for conversions and mixed accounts

If you have both a Roth IRA and a traditional IRA, SEP IRA, or SIMPLE IRA, the pro-rata rule applies to any Roth conversion. The rule treats all your IRAs as one account for tax purposes. If you convert $50,000 from a traditional IRA to a Roth and the traditional IRA still holds $150,000, the IRS considers 75 percent of the conversion to be pre-tax money.

This means you cannot avoid taxes by converting only the after-tax portion of a traditional IRA. The IRS looks at your total balance across all IRAs on December 31 of the year you convert. If you have $200,000 in traditional IRAs and $10,000 in after-tax contributions, only 5 percent of any conversion is treated as after-tax money.

Roth conversions and the five-year rule

When you convert money from a traditional IRA to a Roth, that converted amount has its own five-year holding period. You can withdraw the converted amount (the principal) without penalty at any time. But earnings on the conversion are subject to the 10 percent penalty if you withdraw before age 59½ and before five years have passed since the conversion.

Each conversion year starts its own five-year clock. If you convert in 2024 and again in 2025, the 2024 conversion can be withdrawn penalty-free after five years from 2024, and the 2025 conversion after five years from 2025. This is different from the original Roth contribution five-year rule, which applies to all contributions together.

Frequently Asked Questions

Can I withdraw my contributions without penalty at any age?

Yes. Contributions you made to a Roth IRA are always yours to withdraw without tax or penalty, regardless of your age or how long the account has been open. The IRS assumes you withdraw contributions first, so you can take out what you put in before any earnings are touched.

What if I need the money for an emergency before age 59½?

Withdraw your contributions first — those are tax and penalty-free. If you need more than you contributed, check whether you meet an exception like disability, medical expenses, or first-time home purchase. If not, you will owe income tax and a 10 percent penalty on the earnings portion of any additional withdrawal.

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

No. The five-year clock is based on when you first opened any Roth IRA, not on individual accounts. If you opened your first Roth in 2020, all your Roth IRAs use that same five-year start date. Opening a second account does not restart the clock.

What happens if I withdraw earnings and do not report it?

The IRS will see the withdrawal on your Form 1099-R. If you do not report it on Form 8606 or claim an exception, the IRS can assess the 10 percent penalty plus income tax plus interest. It is better to report the withdrawal and claim an exception if you have one than to ignore it.

Can I put the money back and avoid the penalty?

No. Once you withdraw earnings, you cannot undo the tax and penalty by recontributing. You can make a new contribution up to your annual limit, but that does not erase what you withdrew. The withdrawal is reported to the IRS and is permanent for tax purposes.