Roth earnings are tax-free when you withdraw them, but only if you meet two conditions

The core rule is simple: earnings in a Roth IRA grow tax-free and come out tax-free, as long as you are at least 59½ years old and have held the account for at least five tax years. If you withdraw earnings before you meet both conditions, you owe federal income tax on those earnings plus a 10% early withdrawal penalty.

The five-year rule is per account, not per person. If you open your first Roth at age 58, you cannot touch the earnings until age 63 — even if you have other retirement accounts. The age requirement is straightforward: you must be 59½ or older on the day you withdraw.

Contributions (the money you put in) always come out tax-free and penalty-free, no matter your age or how long you have held the account. The tax applies only to the earnings — the growth on top of what you deposited.

Key Takeaways

  • Roth earnings are tax-free only if you withdraw them after age 59½ and have owned the account for at least five tax years.
  • If you withdraw earnings before meeting both conditions, you owe income tax on the earnings plus a 10% early withdrawal penalty.
  • Your contributions always come out tax-free, regardless of age or account age.
  • The five-year rule applies to each Roth account separately, so opening a second Roth does not reset the clock on your first one.
  • Certain exceptions (disability, death, first-time home purchase up to $10,000 lifetime) allow you to withdraw earnings without the 10% penalty, though income tax may still apply.

How the five-year rule works

The five-year clock starts on January 1 of the tax year in which you open your first Roth IRA or make your first Roth conversion. It does not matter when during that year you open the account — if you open it in December, the clock still started on January 1 of that same year.

Once five tax years have passed, the rule is satisfied for all your Roth accounts. You do not need to wait five years for each individual account. If you opened your first Roth in 2020, the five-year requirement is met on January 1, 2025, for every Roth you own.

The IRS counts tax years, not calendar days. Five tax years means the end of the fifth tax year after the year you opened the account. If you opened a Roth on any date in 2020, the five-year period ends on December 31, 2024.

What happens if you withdraw earnings early

If you withdraw earnings before age 59½ and before five tax years have passed, you owe two things: federal income tax on the earnings at your ordinary tax rate, plus a 10% early withdrawal penalty on those earnings.

Example: You opened a Roth in 2023 with a $7,000 contribution. By 2024, it has grown to $7,500 — a $500 gain. If you withdraw the full $7,500 in 2024, you can take out the $7,000 contribution tax-free. The $500 earnings are subject to income tax (at your tax bracket) plus a 10% penalty ($50), for a total tax cost of roughly $150 to $200 depending on your income.

The IRS uses a specific ordering rule: withdrawals are treated as coming out contributions first, then earnings. So you exhaust your contribution balance before any earnings are taxed.

Exceptions that waive the 10% penalty

Several situations let you withdraw earnings without the 10% penalty, though income tax may still apply. These are narrow exceptions, not blanket permission to access your money early.

Disability: If you become disabled (as defined by the IRS), you can withdraw earnings without the 10% penalty. You still owe income tax on the earnings. Disability has a specific definition under tax law and requires documentation.

Death: If the account owner dies, beneficiaries can withdraw earnings without the 10% penalty. Income tax still applies unless the beneficiary is a surviving spouse who rolls the account into their own Roth.

First-time home purchase: You can withdraw up to $10,000 in lifetime earnings (not contributions) for a first-time home purchase without the 10% penalty. You still owe income tax on the $10,000. "First-time" means you have not owned a home in the past two years.

Substantially equal periodic payments: If you set up a series of substantially equal periodic payments (SEPP) based on your life expectancy, you can withdraw earnings without the 10% penalty. This is complex and requires IRS-approved calculation methods.

Roth conversions and the five-year rule

If you convert money from a traditional IRA to a Roth, the five-year rule applies separately to the converted amount. You have a five-year window before you can withdraw the earnings from that conversion without penalty.

The good news: if you have already satisfied the five-year rule on an earlier Roth, you can withdraw earnings from a new conversion immediately after age 59½, even if the conversion itself is less than five years old. The five-year requirement is met once for all your Roth accounts.

Conversions also trigger a pro-rata rule if you have both traditional and Roth IRAs. When you convert, the IRS treats the conversion as coming from a blended pool of pre-tax and after-tax money across all your traditional IRAs. This can create unexpected tax bills. A tax professional should review any conversion strategy before you execute it.

How to track your five-year clock

The IRS does not send you a notice when your five-year period ends. You are responsible for tracking it. Write down the tax year you opened your first Roth or made your first conversion, then count forward five years.

Your Roth custodian (the bank, brokerage, or fund company holding your account) should have records of when you opened the account, but they do not automatically flag when the five-year rule is satisfied. Keep your own records: the year you opened the account, the year you made any conversions, and the date you turn 59½.

If you are unsure whether you have met the five-year requirement, contact your custodian and ask for the account opening date. If you made a conversion, ask for the conversion date as well.

Frequently Asked Questions

Can I withdraw my contributions without paying tax or penalty?

Yes. Contributions always come out tax-free and penalty-free at any age and at any time. The IRS uses an ordering rule that treats withdrawals as coming from contributions first, then earnings. You can withdraw your contributions without triggering any tax or penalty.

What if I am over 59½ but have not owned the Roth for five years?

You still owe income tax and the 10% penalty on the earnings. Both conditions must be met: age 59½ and five tax years. Meeting one does not satisfy the requirement. You can withdraw contributions at any time, but earnings are locked until both conditions are satisfied.

Does the five-year rule reset if I close my Roth and open a new one?

No. The five-year clock is tied to when you first opened any Roth IRA, not to individual accounts. Closing an account and opening a new one does not restart the timer. The IRS tracks the five-year rule across all your Roth accounts combined.

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

No, as long as the withdrawal is may have access to (age 59½ and five tax years met). may have access to Roth distributions do not appear on your tax return. If you withdraw earnings early and owe the 10% penalty, you report the taxable earnings and the penalty on Form 5329.

What counts as earnings for tax purposes?

Earnings are all investment gains: interest, dividends, and capital gains. If you put $5,000 into a Roth and it grows to $6,500, the $1,500 is earnings. Earnings also include reinvested dividends and interest. Only the original $5,000 contribution is treated as contribution basis.