You don't pay taxes on money you withdraw from a Roth IRA in retirement, but the rules for getting there matter

The core answer is simple: once you reach retirement age and meet the account's holding period, withdrawals from a Roth IRA are tax-free. You don't owe federal income tax on the money you pull out, and in most states you don't owe state income tax either. But that tax-free status only applies if you follow the rules. Withdraw money too early or under the wrong circumstances, and you'll face taxes and penalties on the earnings portion of your withdrawal.

The reason Roth accounts work this way is that you fund them with money you've already paid income tax on. You get no tax deduction when you contribute. In exchange, the IRS lets your money grow tax-free and come out tax-free later. That's the entire deal.

Key Takeaways

  • Roth IRA withdrawals are tax-free in retirement if you're at least 59½ years old and have held the account for at least five tax years.
  • You can withdraw your contributions (the money you put in) at any time without taxes or penalties, even before retirement.
  • Withdrawing earnings before age 59½ triggers income tax on those earnings plus a 10% early withdrawal penalty, with limited exceptions.
  • Conversions from traditional IRAs to Roth IRAs are taxable in the year you convert, but the converted money can be withdrawn tax-free after five years.
  • State income tax on Roth withdrawals depends on your state; most don't tax retirement account withdrawals, but a few do.

The five-year rule and retirement age requirement

To withdraw earnings tax-free, you must satisfy two conditions at the same time: you must be at least 59½ years old, and you must have held the Roth IRA for at least five tax years. The five-year clock starts on January 1 of the year you first contributed to any Roth IRA you own—not just the account you're withdrawing from. If you opened your first Roth in 2020, the five-year period ends on January 1, 2025, regardless of which Roth account holds the money you want to withdraw.

If you meet both conditions, you withdraw everything tax-free: contributions, earnings, and growth. If you're 59½ but haven't held the account five years, you can withdraw your contributions tax-free, but earnings come out taxable and subject to the 10% early withdrawal penalty. If you've held the account five years but aren't yet 59½, the same rule applies—contributions are free, earnings are taxed and penalized.

Contributions versus earnings: why the distinction matters

The IRS treats the money you put into a Roth IRA differently from the money it earns. Your contributions are the dollars you deposited yourself. Your earnings are the interest, dividends, and investment gains those contributions generated. You can pull out contributions at any time, for any reason, without owing taxes or penalties. The five-year rule and age requirement apply only to earnings.

This distinction is why some people use Roth IRAs as emergency savings: you can access your contributions if you need cash, though doing so reduces the amount available to grow for retirement. Earnings, however, are locked away until you're 59½ and have held the account five years. If you withdraw earnings early, the IRS taxes them at your ordinary income tax rate and adds a 10% penalty on top.

Early withdrawal exceptions that avoid the 10% penalty

The 10% early withdrawal penalty applies to earnings withdrawn before age 59½, but the IRS carved out several exceptions. If you meet one of these, you avoid the penalty—though you still owe income tax on the earnings themselves.

The main exceptions are: disability or medical expenses exceeding 7.5% of your adjusted gross income, health insurance premiums while unemployed, a first-time home purchase (up to $10,000 lifetime), substantially equal periodic payments under a specific IRS formula, and death (your beneficiary can withdraw without penalty). Some of these are narrow—the first-time home purchase exception is one-time only and capped at $10,000 total across your lifetime, not per year. If you think you may have access to, check the exact IRS rules for the exception you're considering, because the definitions are strict.

Roth conversions and the pro-rata rule

If you convert money from a traditional IRA to a Roth IRA, you owe income tax on the converted amount in the year you convert. That's not optional—it's how the conversion works. You're moving pre-tax money into a post-tax account, so the IRS collects tax upfront. After the conversion, the five-year rule kicks in: you must wait five tax years before withdrawing the converted amount tax-free, even if you're already 59½.

The pro-rata rule complicates conversions if you have both traditional and Roth IRAs. When you convert, the IRS treats all your traditional IRAs as one pool for tax purposes. If you have $50,000 in a traditional IRA and $10,000 in a SEP-IRA, and you convert $20,000 to a Roth, the IRS calculates what portion of that $20,000 came from pre-tax money versus after-tax contributions. You pay tax on the pre-tax portion. This rule catches many people off guard and can make conversions more expensive than expected if you have multiple traditional accounts.

State income tax on Roth withdrawals

Most states don't tax retirement account withdrawals, including Roth IRA distributions. However, a handful of states do: New Jersey, Vermont, and a few others tax retirement income depending on your age and income level. If you live in one of these states, you may owe state income tax on Roth earnings even though you owe no federal tax. Check your state's tax rules or speak with a tax preparer familiar with your state's treatment of retirement accounts.

If you move to a different state after retiring, your Roth withdrawals are generally taxed under the rules of your new state of residence, not the state where you earned the money or opened the account.

Inherited Roth IRAs and the SECURE Act

If you inherit a Roth IRA from someone other than your spouse, the rules changed under the SECURE Act (passed in 2019). You must withdraw the entire balance within ten years of the original account holder's death. Those withdrawals are tax-free if the original account holder had held the Roth for five years and was at least 59½ when they died. If either condition wasn't met, the earnings portion of your withdrawal is taxable, though the 10% penalty doesn't apply to inherited accounts.

Spouses who inherit Roth IRAs have more flexibility: they can treat the inherited account as their own, roll it into their own Roth, or keep it as an inherited account. The choice affects when and how much you must withdraw.

Frequently Asked Questions

Can I withdraw my Roth IRA contributions without paying taxes?

Yes. You can withdraw the money you personally contributed to a Roth IRA at any time, at any age, without owing taxes or penalties. Only earnings are restricted by the five-year rule and age 59½ requirement. Keep records of your contributions so you can prove to the IRS which portion of your withdrawal is contributions versus earnings if you're audited.

What happens if I withdraw Roth earnings before age 59½?

You owe income tax on the earnings at your ordinary tax rate, plus a 10% early withdrawal penalty on the earnings amount. For example, if you withdraw $5,000 in earnings before 59½, you pay income tax on $5,000 plus $500 in penalty. Some exceptions exist—disability, medical expenses, first-time home purchase—that waive the penalty but not the income tax.

Do I have to pay taxes on Roth IRA growth?

No, not while the money stays in the account. Roth IRAs grow tax-free. You only owe taxes if you withdraw earnings before meeting the age and five-year requirements. Once you're 59½ and have held the account five years, all withdrawals—including growth—are tax-free.

Is a Roth conversion taxable?

Yes. When you convert a traditional IRA to a Roth, you owe income tax on the pre-tax portion of the amount converted in that tax year. The pro-rata rule means if you have multiple traditional IRAs, the IRS blends them together to calculate how much of your conversion is taxable. After conversion, you must wait five tax years before withdrawing the converted amount tax-free.

Do I report Roth IRA withdrawals on my tax return?

If your withdrawal is entirely contributions or if you're 59½ and have held the account five years, you don't report it as income. If you withdraw earnings before meeting those conditions, you report the taxable portion on Form 8606 and include it in your income. Your IRA custodian will send you a Form 1099-R showing the withdrawal amount, though it may not distinguish between contributions and earnings.