Roth IRA Withdrawal Rules and the 5-Year Rule Explained

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You can take your own Roth IRA contributions out at any time, at any age, with no income tax and no 10% penalty. Earnings are different. They come out tax- and penalty-free only in a qualified distribution, which requires two things. First, at least five years must have passed since January 1 of the tax year of your first Roth IRA contribution. Second, you must be 59½ or older, disabled, a beneficiary after the owner’s death, or using up to $10,000 (lifetime) for a first home. Money you converted from a traditional IRA follows a separate five-year clock for each conversion. Every withdrawal is treated as coming out in a fixed order: contributions first, then conversions, then earnings.

How Withdrawals Are Taxed: the Ordering Rules

A Roth IRA balance is made up of three kinds of money:

• Contributions: cash you deposited directly.
• Conversions: money moved in from a traditional IRA or another pre-tax retirement account.
• Earnings: investment growth on the first two, including the compounding of returns over time.

You do not choose which kind you are withdrawing. For tax purposes, the IRS treats all of your Roth IRAs as one account and applies a set order:

1. Contributions come out first, always tax- and penalty-free.
2. Converted amounts come out next, oldest conversion first. You already paid tax on them when you converted, so they are not taxed again. A penalty can apply in certain cases, explained below.
3. Earnings come out last. They are taxable and possibly penalized unless the distribution is qualified.

This order is why many early withdrawals cost nothing. If you have contributed $30,000 over the years, you can take out up to $30,000 before any earnings are treated as leaving the account, whatever your age or account history.

The Two Roth IRA 5-Year Rules

Both versions use the same counting method: the clock starts on January 1 of the relevant year, not on the date the money arrived. What each clock controls is different.

The 5-year rule for earnings

For earnings to be tax-free, at least five years must pass between:

• January 1 of the tax year for which you made your first Roth IRA contribution, and
• the date of the withdrawal.

The tax year and the calendar year can differ, because you can make a contribution for a given year up until that year’s tax filing deadline, usually April 15 of the following year. Suppose (hypothetically) your first contribution goes in on April 10, 2025, and you designate it for tax year 2024. Your clock starts January 1, 2024, and the five-year requirement is met on January 1, 2029. Designate the same deposit for 2025 instead, and you wait until January 1, 2030.

This clock is not tied to one account. Once it starts, any Roth IRA you open later is treated as if it were opened on the same date. Moving to a new provider or opening a second Roth IRA does not restart it. The rule applies at every age, so someone who opens a first Roth IRA at 62 still needs five years before earnings come out fully tax-free.

The 5-year rule for conversions

Converted money has its own clock, and every conversion gets a separate one, starting January 1 of the year of that conversion. A conversion made in 2025 satisfies the rule on January 1, 2030. A conversion made in 2026 satisfies it on January 1, 2031. This applies to backdoor Roth conversions too.

This clock is about the 10% penalty, not income tax. If you are under 59½ and withdraw the taxable portion of a conversion before its five years are up, the 10% penalty applies to that amount unless an exception covers you. Without this rule, someone under 59½ could convert a traditional IRA and immediately withdraw the money to get around the early withdrawal penalty on the traditional account. Once you are 59½, the conversion clocks no longer matter for withdrawing converted principal. The earnings rule still applies to any growth.

Qualified vs. Non-Qualified Distributions

A qualified distribution is completely tax- and penalty-free. It requires the earnings five-year rule plus at least one of the following:

• You are 59½ or older.
• You are permanently disabled.
• The distribution goes to your beneficiary or estate after your death.
• You use the money to buy, build or rebuild a first home, up to a $10,000 lifetime limit, and meet the related requirements.

Anything else is a non-qualified distribution. Contributions and previously taxed conversions inside it are still not taxed. The earnings portion is taxed as ordinary income, and the 10% penalty applies to it unless you qualify for an exception.

Here is how age and the five-year rule combine for earnings:

Example: a Non-Qualified Withdrawal

Hypothetical: Dana is 45. Her Roth IRA holds $125,000: $50,000 in contributions, no conversions and $75,000 in earnings. She withdraws $60,000.

• The first $50,000 is a return of contributions: no tax, no penalty.
• The remaining $10,000 is earnings. Because Dana is under 59½ and has no qualifying event, it is a non-qualified distribution. The $10,000 is added to her taxable income, and a $1,000 penalty (10% of $10,000) applies unless she qualifies for an exception.

If Dana had withdrawn $50,000 or less, the withdrawal would have cost her nothing in tax or penalty. The decision she faces is about the $10,000 of earnings, not the whole withdrawal.

Exceptions to the 10% Penalty

Several situations remove the 10% penalty on earnings even when the distribution is not qualified. Income tax on the earnings still applies unless the distribution meets the qualified test. Exceptions include:

• Reaching age 59½
• Permanent disability or terminal illness
• Inheriting the IRA as a beneficiary
• Buying, building or rebuilding a first home
• A series of substantially equal periodic payments
• Unreimbursed medical expenses above 7.5% of adjusted gross income
• Health insurance premiums paid while unemployed
• Qualified higher education expenses
• An IRS levy on the account
• The birth or adoption of a child
• A qualified disaster
• An emergency personal expense
• Being a victim of domestic abuse

This is not the full list. Each exception has its own conditions, such as dollar caps, timing windows and documentation, that must be met for it to apply.

Common Mistakes and Misunderstandings

Thinking all Roth money is locked until retirement. Your contributions are never locked. The age and holding-period rules apply to earnings and, for younger savers, to converted amounts.

Assuming each account has its own earnings clock. It does not. The first contribution to any Roth IRA starts the single clock that all your Roth IRAs share. Conversions are the case where each event gets its own clock.

Counting from the deposit date. Both clocks start on January 1 of the relevant year. A contribution made in the spring and designated for the prior tax year can effectively shorten the wait by more than a year.

Confusing this rule with the inherited IRA five-year rule. A different five-year rule covers beneficiaries of IRAs, traditional and Roth, whose owners died before 2020. With exceptions, those beneficiaries had to empty the account by the end of the fifth year after the owner’s death or take distributions based on their own life expectancy. For deaths in 2020 and later, many designated beneficiaries fall under a 10-year rule instead. If you inherit a Roth IRA, the 10% penalty does not apply. Earnings are tax-free once the original owner’s five-year clock has been met.

For the rest of your financial plan beyond retirement accounts, see the personal finance guides.

FAQs

The Bottom Line

Savers under 59½ who may need cash early, and anyone converting traditional IRA money, should track what they have contributed and when each clock started. Withdrawing no more than your total contributions avoids tax and penalty at any age. Earnings become fully tax-free only once the five-year rule is met and a qualifying event applies, so check whether a penalty exception covers you before tapping growth early.