Roth IRA withdrawals are tax-free only if you meet two conditions

A Roth IRA is not entirely tax-free. You can withdraw your contributions (the money you put in) at any time without paying tax or penalty. But withdrawals of earnings (the investment gains) are tax-free only if you are age 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.

The five-year rule applies to the Roth IRA account itself, not to each contribution. This means if you opened your first Roth IRA in 2020, all your Roth IRAs (if you have more than one) satisfy the five-year requirement starting in 2025, regardless of when you made individual contributions.

Understanding which part of your balance is contributions and which is earnings matters because the tax treatment is completely different. The IRS tracks this for you, but you need to know the distinction before you withdraw.

Key Takeaways

  • Contributions to a Roth IRA can be withdrawn tax-free and penalty-free at any age, but earnings can only be withdrawn tax-free if you are 59½ or older and have held the account for at least five tax years.
  • If you withdraw earnings before age 59½ or before the five-year holding period ends, you owe income tax on those earnings plus a 10% penalty.
  • The five-year rule is based on when you first opened a Roth IRA, not when you made each individual contribution.
  • Conversions from a traditional IRA to a Roth IRA have their own separate five-year rule for penalty-free withdrawal of the converted amount.

Contributions versus earnings: which part is tax-free

Your Roth IRA balance has two parts: contributions and earnings. Contributions are always tax-free to withdraw. Earnings are the investment gains—interest, dividends, and capital appreciation—that your money earned inside the account.

The IRS uses a specific order to determine what you are withdrawing. If your account has both contributions and earnings, withdrawals are treated as coming from contributions first. This means you can take out your contributions without triggering tax or penalty, even if you are young or have not held the account long enough.

Once you have withdrawn all your contributions, any further withdrawals come from earnings. That is when the age and five-year rules kick in. If you do not meet both conditions, you owe tax and penalty on the earnings portion.

The five-year holding period explained

The five-year rule is not about how long you have held the money—it is about how long the account itself has existed. The clock starts on January 1 of the year you opened your first Roth IRA, regardless of when during that year you actually funded it.

If you opened a Roth IRA on December 15, 2020, and contributed $1,000, the five-year period began on January 1, 2020. By January 1, 2025, you have satisfied the five-year requirement for all your Roth IRAs. This applies even if you opened a second Roth IRA in 2023—both accounts use the same five-year start date.

The only exception is if you convert money from a traditional IRA to a Roth IRA. Conversions have their own separate five-year rule. If you convert in 2024, you cannot withdraw that converted amount penalty-free until 2029, even if your original Roth IRA opened in 2020.

Early withdrawal penalties and exceptions

If you withdraw earnings before age 59½ and before the five-year period ends, you owe a 10% penalty on the earnings portion plus income tax at your ordinary rate. For example, if you withdraw $5,000 in earnings at age 35 and are in the 22% tax bracket, you owe $500 in penalty plus $1,100 in income tax, for a total of $1,600.

The IRS does allow some exceptions to the 10% penalty (though not the income tax). You can withdraw earnings penalty-free before 59½ if you are disabled, a first-time homebuyer (up to $10,000 lifetime), or taking substantially equal periodic payments under a specific formula. You still owe income tax on the earnings in these cases, but the 10% penalty is waived.

Contributions, however, have no penalty or tax at any age. You can always pull out what you put in.

Roth conversions and their separate five-year rule

If you convert money from a traditional IRA, SEP IRA, or SIMPLE IRA to a Roth IRA, that converted amount is subject to a separate five-year rule. The converted funds must stay in the Roth IRA for five tax years before you can withdraw them penalty-free, even if your original Roth IRA opened years earlier.

The five-year period for a conversion starts on January 1 of the year you make the conversion. If you convert in 2024, the five-year period runs through December 31, 2028. You can withdraw the converted amount penalty-free starting January 1, 2029, as long as you are 59½ or older.

If you withdraw converted funds before the five-year period ends, you owe a 10% penalty on the amount withdrawn, even if you are over 59½. The income tax on the conversion itself was already paid when you converted, so you do not owe tax again—only the penalty.

How to track contributions and conversions

Your Roth IRA custodian (the bank, brokerage, or investment firm holding your account) should provide you with a year-end statement showing contributions and conversions. Keep these statements. They are your proof of how much you contributed in each year.

If you have made conversions, ask your custodian for a conversion history. This shows the date and amount of each conversion and helps you calculate when the five-year period ends for each one. Some custodians track this automatically; others require you to request it.

The IRS also tracks Roth IRA activity through Form 5498, which your custodian files each year. You receive a copy for your records. If you ever face a question about your contributions or conversions, these forms are your documentation.

Frequently Asked Questions

Can I withdraw my contributions without paying tax or penalty?

Yes. Contributions to a Roth IRA can be withdrawn at any time, at any age, without tax or penalty. Only earnings are subject to the age and five-year rules. Your custodian's statement should show your total contributions, making it easy to know how much you can withdraw penalty-free.

What happens if I withdraw earnings before age 59½?

You owe income tax on the earnings at your ordinary tax rate, plus a 10% penalty. For example, withdrawing $3,000 in earnings at age 40 in the 24% bracket costs $720 in tax plus $300 in penalty. Exceptions exist for disability, first-time home purchase, and a few other situations, but the income tax still applies.

Do I have to wait five years for each contribution I make?

No. The five-year rule applies to the account, not to individual contributions. If you opened your Roth IRA in 2020, all contributions to all your Roth IRAs satisfy the five-year requirement starting in 2025, whether you contributed in 2020 or 2024.

Is a Roth conversion subject to the same five-year rule as my regular contributions?

No. Conversions have their own five-year rule separate from your original Roth IRA. If you convert in 2024, those converted funds cannot be withdrawn penalty-free until 2029, even if your Roth IRA opened in 2015. The income tax on the conversion was paid upfront, so you only owe the 10% penalty if you withdraw early.

Can I withdraw my earnings tax-free if I am over 59½ but have not held the account five years?

No. You must meet both conditions: age 59½ and a five-year holding period. If you are 62 but opened your Roth IRA only three years ago, earnings withdrawals are still subject to income tax and the 10% penalty.