Roth IRA withdrawals are tax-free in retirement, but you may owe taxes on earnings if you withdraw before age 59½

A Roth IRA is designed to be tax-free when you retire. The money you put in (called contributions) comes out tax-free at any time. The earnings your money makes inside the account also come out tax-free — but only if you follow the rules. The main rule is that you must be at least 59½ years old and have held the account for at least five years before you withdraw earnings.

If you withdraw earnings before you meet both conditions, you will owe income tax on those earnings plus a 10% early withdrawal penalty. The contribution part of your withdrawal is never taxed, no matter when you take it out. This is the core difference between a Roth and a traditional IRA: with a Roth, you pay taxes going in (on money you already earned), so you do not pay them going out.

Key Takeaways

  • Contributions to a Roth IRA come out tax-free at any age, but earnings are taxed if you withdraw before age 59½ and before holding the account five years.
  • The five-year rule starts from January 1 of the year you made your first Roth contribution, not from the date you opened the account.
  • If you convert a traditional IRA to a Roth, you owe taxes on the converted amount in the year of conversion, and a separate five-year rule applies to those converted funds.
  • You can withdraw contributions penalty-free at any time for any reason, which makes a Roth useful as an emergency fund alongside retirement savings.
  • The IRS tracks whether you have met the five-year requirement across all your Roth accounts combined, so opening multiple accounts does not reset the clock.

How the five-year rule works

The five-year holding period is not five years from the day you open your account. It is five years from January 1 of the year you made your first Roth contribution. If you opened a Roth IRA on December 15, 2024, and made your first contribution that same month, your five-year period started on January 1, 2024. You would meet the five-year requirement on January 1, 2029.

This matters because the IRS counts the five years across all your Roth accounts together. If you have two Roth IRAs and you made your first contribution to either one in 2024, both accounts are subject to the same five-year clock. You cannot reset it by opening a new account.

The five-year rule applies separately to conversions. If you convert a traditional IRA to a Roth, that converted money has its own five-year holding period. You can withdraw your original contributions from the Roth at any time, but converted funds are subject to both the five-year rule and the age 59½ rule before they are tax-free.

Contributions versus earnings: what gets taxed

The IRS separates your Roth balance into two parts: contributions (money you put in) and earnings (growth). When you withdraw, the IRS assumes you take contributions out first, then earnings. This is called the "ordering rule," and it protects you from accidentally triggering taxes on earnings when you only meant to withdraw what you put in.

If your Roth IRA has $50,000 in contributions and $15,000 in earnings, and you withdraw $40,000, you are taking out contributions only. No tax is owed. If you withdraw $60,000, the first $50,000 is contributions (tax-free), and the last $10,000 is earnings. That $10,000 is taxed as income and subject to the 10% penalty if you are under 59½ and have not met the five-year requirement.

Tracking this yourself is difficult if you have made many contributions over years. The IRS Form 8606 is used to report Roth conversions and nondeductible contributions, and your custodian (the bank or brokerage holding your Roth) should provide you with a record of your basis (total contributions) each year.

Roth conversions and the tax bill

If you convert money from a traditional IRA, SEP IRA, or SIMPLE IRA to a Roth, you owe income tax on the converted amount in the year you do the conversion. This is not optional. The converted amount is treated as taxable income on your tax return for that year.

For example, if you convert $30,000 from a traditional IRA to a Roth in 2024, you report $30,000 as taxable income on your 2024 tax return. If you are in the 22% tax bracket, that conversion costs you roughly $6,600 in federal tax (plus any state tax). You do not pay this tax from the IRA itself — you pay it from other money when you file your return.

After you pay the conversion tax, the converted funds sit in your Roth and grow tax-free. But those converted funds are subject to the five-year rule and the age 59½ rule before you can withdraw them without penalty. If you convert at age 50 and withdraw the converted amount at age 55, you owe a 10% penalty on the earnings portion of that withdrawal, even though you already paid income tax on the conversion.

Exceptions that let you withdraw earnings without penalty

The IRS allows you to withdraw earnings penalty-free (though not tax-free) before age 59½ in a few specific situations. These are rare, but they exist. The main ones are disability, medical expenses over 7.5% of your adjusted gross income, and a series of substantially equal periodic payments (SEPP) based on your life expectancy.

Even if you meet one of these exceptions, you still owe income tax on the earnings you withdraw. The exception removes only the 10% penalty. If you are under 59½ and withdraw $5,000 in earnings under a disability exception, you owe income tax on that $5,000, but not the penalty.

The most common exception in practice is the first-time homebuyer rule, which lets you withdraw up to $10,000 in earnings (lifetime total) penalty-free if you are buying your first home. You still owe income tax on the $10,000, and you must have held the Roth for at least five years. This rule applies only to earnings, not contributions.

What happens if you miss the five-year deadline

If you withdraw earnings before the five-year period ends, the IRS charges you income tax on those earnings plus a 10% early withdrawal penalty. There is no way around this except the exceptions listed above. You cannot undo the withdrawal or reclassify it.

If you are in the 24% tax bracket and you withdraw $10,000 in earnings before the five-year mark, you owe roughly $2,400 in federal income tax plus $1,000 in penalty, for a total of $3,400. State tax may apply on top of that. This is why it is important to know whether your withdrawal is contributions (always safe) or earnings (risky before five years).

The five-year rule is per person, not per account. If you have three Roth IRAs and you made your first contribution to any of them in 2023, all three are subject to the same five-year clock. You cannot withdraw earnings from one account penalty-free while the others are still waiting.

Roth conversions and pro-rata tax

If you have both a traditional IRA and a Roth IRA, and you convert part of the traditional IRA to a Roth, the IRS applies the pro-rata rule. This rule says you cannot cherry-pick only the after-tax money in your traditional IRA to convert. Instead, the conversion is treated as coming proportionally from all your traditional, SEP, and SIMPLE IRAs combined.

Here is an example: You have a traditional IRA with $100,000 (all pre-tax contributions and earnings). You also have $20,000 in after-tax contributions in that same IRA. You want to convert only the $20,000 to a Roth to avoid the tax bill. The IRS will not allow this. Instead, it treats your conversion as 83% pre-tax money and 17% after-tax money (based on the ratio of pre-tax to after-tax across all your IRAs). You end up owing tax on most of the conversion anyway.

This rule is one reason people with large traditional IRAs sometimes struggle with Roth conversions. If you are considering a conversion and you have a traditional IRA with significant pre-tax money, consult a tax professional to understand your pro-rata liability before you convert.

Frequently Asked Questions

Do I have to report my Roth IRA on my tax return?

No, not in most cases. If you only withdraw contributions or if you withdraw after age 59½ and five years have passed, you do not report anything. If you withdraw earnings before meeting both conditions, you report the taxable earnings on Form 8606 and include them in your income. If you do a conversion, you report it on Form 8606 in the year of conversion.

What if I withdraw contributions and do not know how much I contributed?

Your custodian (bank or brokerage) is required to track your basis and provide it to you. Request a statement showing your total contributions since you opened the account. The IRS also has records based on the Forms 5498 your custodian files each year. If you cannot find your records, the IRS can help you reconstruct them.

Can I withdraw my contributions without paying any tax or penalty?

Yes. Contributions to a Roth IRA can be withdrawn at any time, at any age, for any reason, with no tax and no penalty. This is one of the main advantages of a Roth. Many people use this feature to keep a Roth as a backup emergency fund while still saving for retirement.

If I convert a traditional IRA to a Roth, do I owe taxes twice?

No. You owe income tax on the conversion in the year you do it. After that, the converted money grows tax-free in the Roth. You do not owe tax again when you withdraw it in retirement (as long as you are 59½ and five years have passed). You already paid the tax upfront.

What if I inherit a Roth IRA from someone else?

Inherited Roth IRAs have different rules depending on whether you are a spouse or a non-spouse beneficiary. Spouses can treat the inherited Roth as their own. Non-spouse beneficiaries must withdraw the entire balance within 10 years (as of 2024 rules). Withdrawals of contributions are always tax-free; withdrawals of earnings are tax-free only if the original account holder had met the five-year requirement.