The Two Key Roth IRA Withdrawal Rules
Rule 1 — The Contribution Ordering Rule: When you withdraw from a Roth IRA, contributions come out first (tax-free and penalty-free, always), then converted amounts, then earnings. Since contributions were already taxed, you can withdraw them at any time for any reason without tax or penalty. Rule 2 — The 5-Year Rule: To withdraw EARNINGS tax-free, your Roth IRA must be at least 5 years old AND you must be 59½ or older (or meet another qualifying exception).
Roth IRA withdrawal rules by money type
| What You Withdraw | Tax? | Penalty? | Requirements |
|---|---|---|---|
| Contributions | Never | Never | No requirements — anytime |
| Conversions (within 5 years) | No (already taxed) | 10% on earnings portion | Must be 59½ or 5 years from conversion |
| Conversions (after 5 years) | No | No | No requirements |
| Earnings — qualified distribution | No | No | Roth is 5+ years old AND you are 59½+ |
| Earnings — non-qualified distribution | Yes (ordinary income) | 10% (with exceptions) | Does not meet qualified distribution criteria |
If you contribute to a Roth IRA for the first time in December 2025, your 5-year clock starts January 1, 2025 — and the period ends January 1, 2030. You need only make ONE contribution to start the clock — subsequent contributions do not restart it.
Exceptions to the 10% Penalty on Earnings
- Age 59½ or older — no penalty on any distribution
- Death or permanent disability
- First-time homebuyer ($10,000 lifetime maximum from earnings)
- Qualified higher education expenses
- Series of substantially equal periodic payments (72(t) SEPP)
- Health insurance premiums while unemployed
- Qualified military reservist distribution
- Birth or adoption of a child ($5,000 per event)
The Multiple 5-Year Rules
There are actually two different 5-year rules for Roth IRAs: (1) The 5-year rule for earnings withdrawal — all Roth IRA accounts use the same start date (your first ever Roth IRA contribution). (2) The 5-year rule for Roth CONVERSIONS — each conversion has its own separate 5-year clock, measured from January 1 of the year of the conversion. Confusing these two rules leads to planning errors.
The two separate Roth IRA 5-year rules
| 5-Year Rule | Applies To | Clock Starts | Purpose |
|---|---|---|---|
| Earnings 5-year rule | All Roth IRAs as a whole | January 1 of year of first-ever Roth contribution | Needed for tax-free earnings withdrawal |
| Conversion 5-year rule | Each individual conversion amount | January 1 of year of conversion | Avoids 10% penalty on converted amounts before 59½ |
Project Your Roth IRA Value
Calculate what your Roth IRA will be worth at retirement — all tax-free and available under the right conditions.