Roth IRA Withdrawal Rules

Key Takeaways

Withdrawal rules for Roth IRAs are more flexible than those for traditional IRAs and 401(k)s.
Account holders can withdraw their contributions without incurring taxes or penalties.
People over age 59½ who've held their accounts for at least five years can withdraw contributions and earnings with no tax or penalty.
Special exceptions apply for those who are under 59½ or who don't meet the five-year rule if they make withdrawals for a first-time home purchase, college expenses, or other situations.
There are no required minimum distributions for Roth IRAs during your lifetime.

Roth IRA Contributions and Earnings

Roth IRA withdrawal rules differ depending on whether you take out your contributions or your investment income.

Contributions are the money you deposit into an IRA.
Earnings are your profits.
Both can grow tax-free in your account.

The annual contribution limit to both traditional and Roth IRAs is $7,000 for 2024, which is a $500 increase from 2023. Individuals age 50 and over can deposit a catch-up contribution of $1,000 for each tax year.

You can withdraw your Roth IRA contributions at any time and for any reason with no tax or penalties because the contributions are made using after-tax dollars. You've already paid income taxes on that money. It's as if you never contributed in the first place if you make a contribution that you later withdraw.

But withdrawals on the earnings in the account work differently. These distributions may be subject to income taxes and a 10% penalty, depending on your age and how long you've held the account. You're only permitted to withdraw the earnings from your contributions after you reach age 59½, according to the IRS, and if you've held the account for at least five years. But there are certain exceptions.

Roth IRA Income Limits

There are limits to the amount you can contribute to a Roth IRA and your income can also exclude you from contributing if you exceed the thresholds set by the Internal Revenue Service (IRS). The amount you're allowed to contribute annually to a Roth IRA can be phased out depending on how much income you earn.

This table outlines when the contribution phase-out begins and when the phase-out is complete. You're no longer eligible to contribute to their Roth IRA if you reach the top income range for your tax-filing status.

Roth IRA Eligibility Phase-Out Income Ranges
Filing Status	2023	2024
Single and Head of Household	$138,000 to $153,000	$146,000 to $161,000
Married Filing Jointly	$218,000 to $228,000	$230,000 to $240,000
Married Filing Separately	$0 to $10,000	$0 to $10,000

Roth IRA 5-Year Rule

You can generally withdraw your earnings without owing any taxes or penalties if you're at least 59½ years old and it's been at least five years since you first contributed to your Roth IRA. This is known as the five-year rule.

The five-year rule applies regardless of your age at the time you opened the account. You have to wait to withdraw until you're 63 to avoid taxes if you're 58 years old when you make your first contribution.

The clock starts ticking on January 1 of the year you made your first contribution to any Roth. You typically have until April 15 of the following tax year to contribute. IRA contributions for 2023 can be made until April 15, 2024. So your five years might not be five full calendar years.

You'd only have to wait until Jan. 1, 2025 to withdraw your Roth IRA earnings tax-free if you contributed to your IRA in early April 2021 but designated it for the 2020 tax year, assuming you’re at least 59½ years old.

The five-year clock starts on January 1 of the year you made the conversion with a Roth IRA conversion. It starts when the original owner made the first contribution, not when the account is passed on by inheritance, for inherited Roth IRAs.

Roth IRA Qualified Distributions

Qualified distributions are tax-free and penalty-free. A Roth IRA distribution is considered qualified if your account meets the five-year rule and the withdrawal is:

Made on or after the date you turn 59½
Taken because you have a permanent disability
Made by a beneficiary or your estate after your death
Used to buy, build, or rebuild your first home for which a $10,000 lifetime maximum applies

Follow these guidelines to avoid the 10% early withdrawal penalty:

Withdrawals must be taken after age 59½
Withdrawals must be taken after a five-year holding period

Roth IRA Non-Qualified Distributions

Non-qualified distributions are withdrawals that don’t meet the IRS guidelines for qualified distributions. You'll pay taxes at your ordinary income tax rate on earnings plus an additional 10% penalty.

You may not have to pay the 10% penalty if one of these exceptions applies, however:

You take a series of substantially equal distributions.
You have unreimbursed medical expenses exceeding 7.5% of your adjusted gross income (AGI).
You pay medical insurance premiums after losing your job.
The distribution is due to an IRS levy.
You're taking qualified reservist distributions.
You need the money for qualified disaster recovery.
You're taking the distribution to pay for qualified education expenses.
You're covering the cost of childbirth or adoption expenses up to $5,000.

Here's a rundown of the withdrawal rules for Roth IRAs:

Roth IRA Withdrawal Rules
Your Age	Five-Year Rule Met?	Taxes and Penalties on Withdrawals	Qualified Exceptions
59 ½ or older	Yes	Tax-free and penalty-free.	N/A
59 ½ or older	No	Tax on earnings but no penalty.	N/A
Younger than 59 ½	Yes	Tax and 10% penalty on earnings. You may be able to avoid both if you have a qualified exception.	First-time home purchase Due to a disability Made to a beneficiary or your estate after your death
Younger than 59 ½	No	Tax and 10% penalty on earnings. You may be able to avoid the penalty but not the tax if you have a qualified exception.	First-time home purchase; Qualified education expenses; Unreimbursed medical bills; Health insurance premiums while you're unemployed; Due to a disability; Childbirth or adoption expenses

You can withdraw your own contributions to your Roth IRA penalty-free at any time, regardless of your age. But that rule doesn't apply to any earnings that result from those contributions.

First-Time Homebuyer Exception

Several IRS exceptions let you withdraw money from your Roth IRA without paying a penalty. A primary exception is for first-time homebuyers. You may still qualify as a first-time homebuyer even if you've owned a home in the past.

You can avoid taxes on the withdrawal if you meet the five-year rule but you'll pay income taxes on the earnings portion of the distribution if it's been fewer than five years since your first IRA contribution. Withdrawals from a Roth IRA come in a specific order:

Contributions
Money converted from another account such as a 401(k) or traditional IRA
Earnings

There’s a lifetime cap of $10,000 so this is a one-time deal for most investors. But many investors won't have to dip into their earnings because contributions come out first. This means they can avoid taxes.

You have 120 days to use the money to buy, build, or rebuild a home after you withdraw it. You can also use the money to help a child, grandchild, or parent who meets the first-time homebuyer definition.

The IRS considers you to be a first-time homebuyer if you and your spouse haven’t owned a home during the previous two years.

Higher Education Expenses

You can take penalty-free withdrawals from your Roth IRA to pay for higher education expenses at a college, university, vocational school, or other post-secondary educational institution. But you'll still be on the hook for income taxes on the earnings portion. Qualified expenses include:

Tuition
Fees
Books
Supplies
Required equipment
Room and board (if you're at least a half-time student)

The distribution can be used to help out your spouse, children, grandkids, or great-grandkids (and, of course, you). But the withdrawal can't exceed your higher education expenses for the year no matter who benefits.

Keep in mind that Roth IRAs and other retirement accounts aren't counted as assets on the Free Application for Student Aid (FAFSA). However, withdrawals count as income. It could reduce the amount of financial aid you receive if you use your Roth IRA to pay for education expenses.

You Can Take a Withdrawal, But Should You?

A Roth IRA withdrawal may be the easy solution if money is tight but if you can find another way to make ends meet, you should do so. You'll avoid any potential taxes and penalties and you'll keep your retirement savings intact and on track. You can't repay the money that you take out of your Roth IRA. That money and its potential earnings are gone forever once you take a withdrawal.

Roth IRAs boast tax-free growth and tax-free withdrawals on qualified distributions. You could miss out on years or even decades of tax-free earnings and growth if you withdraw money. That can take a big bite out of your retirement nest egg and it's the biggest drawback of taking an early withdrawal.

Pros

You can withdraw contributions, tax- and penalty-free
You can withdraw earnings under some special circumstances
You can avoid paying interest on a loan

Cons

Withdrawing earnings incurs penalties and taxes if you haven't had the account for five years or are under 59½
You can't repay the money
You miss out on future tax-free growth

Required Minimum Distributions (RMDs)

Unlike traditional IRAs, there are no required minimum distributions (RMDs) for Roth IRAs during your lifetime. You can leave the account alone if you don't need the money. Your contributions and earnings can continue to grow.

And you can leave your Roth to a beneficiary tax-free if you've had the account for at least five years. This makes the Roth a fantastic wealth-transfer strategy.

Should You Have Cash in Your Roth IRA?

Many investors like to keep an emergency fund in their Roth IRAs because of the flexible withdrawal rules. A small portion can be dedicated to cash or other low-risk investments, such as certificates of deposit (CDs). But there's a limit to how much you can contribute to your Roth IRA so it might be a better idea to keep your cash in a non-retirement account.

Take advantage of the Roth IRA's tax-free growth and invest in more aggressive options like mutual funds, exchange-traded funds (ETFs), or a real estate investment trust (REIT) and dividend-paying stocks. These options would be taxed very heavily in a taxable account or one where you pay taxes on growth and distributions like a traditional IRA.

Can You Get Money From a Roth IRA Before Retirement?

Yes, you can withdraw your own contributions from your Roth IRA penalty-free at any time, regardless of your age. But you can't withdraw the earnings on those contributions tax and penalty-free until you reach age 59½ and you've had the account open for at least five years.

Can You Use Your Roth IRA as Life Insurance?

A Roth IRA transfers to your heirs tax-free so it can be used as a form of life insurance. Starting a Roth IRA at a young age and continuing to contribute to it should cover your funeral costs and help you in retirement as well.

Is a Roth IRA the Easiest Retirement Account to Withdraw From?

The Roth IRA is the easiest common retirement account to withdraw from because of the ability to withdraw contributions at any age and the flexibility to withdraw gains before retirement age for certain circumstances.

But individuals with a 457 plan or a Roth 457 plan have even more withdrawal flexibility than people with Roth IRAs. They can take money out of the 457 plan with no penalties but income tax after they leave the job that sponsored the 457, usually state or local government work. They can take money out at any time after separation, for any reason with no taxes or penalties if they have a Roth 457 plan.

The Bottom Line

Financial implications such as taxes, penalties, and loss of future earnings can make an early withdrawal from your Roth IRA a bad idea. But it can be comforting to know that your Roth is there for you if you have no other options.

It’s always a good idea to check with a qualified financial professional before making any big decisions about Roth IRA withdrawals. But you’ll be well on your way to a solid withdrawal plan that protects your assets while allowing your retirement cash to take care of your family if you pay close attention to the rules.

Correction–April 15, 2024: This article previously misstated that Roth contributions are made with pre-tax dollars. It's been corrected to state that these contributions are made with post-tax dollars.