You do not pay taxes on money you withdraw from a Roth IRA in retirement, but the rules for *when* you can withdraw without penalty are strict
A Roth IRA is a retirement account where you contribute money that has already been taxed. Because you paid income tax on that money before it went in, you do not owe federal income tax when you take it out later — even if it has grown significantly. This is the main advantage of a Roth over a traditional IRA, where withdrawals are taxed as ordinary income.
However, the tax-free withdrawal only applies if you follow the rules. You must be at least 59½ years old and have held the account for at least five tax years. If you withdraw before meeting both conditions, you may owe taxes and a 10 percent penalty on the earnings portion of your withdrawal. The money you contributed (called your basis) can always come out tax-free and penalty-free, but earnings cannot.
Key Takeaways
- Contributions to a Roth IRA are made with after-tax money, so you pay no income tax on withdrawals in retirement if you follow the rules.
- You must be at least 59½ and have owned the account for at least five tax years to withdraw earnings tax-free; contributions can come out anytime without penalty.
- If you withdraw earnings before age 59½, you owe income tax plus a 10 percent penalty on the earnings portion only.
- Conversions from a traditional IRA to a Roth are taxable in the year you convert, but the converted amount can then be withdrawn tax-free after five years.
The difference between contributions and earnings
Your Roth IRA contains two parts: the money you put in (contributions) and the profit it has made (earnings). The tax rules treat them very differently. You can withdraw your contributions at any age without owing taxes or penalties, because you already paid tax on that money before depositing it.
Earnings are the investment gains — interest, dividends, and capital appreciation. These have never been taxed. If you withdraw earnings before age 59½, you owe federal income tax on them at your ordinary tax rate, plus a 10 percent early withdrawal penalty. The IRS uses a formula called the pro-rata rule to figure out how much of a withdrawal counts as contributions versus earnings if your account holds both.
The five-year rule and when it resets
The five-year rule is not about your age — it is about how long you have owned a Roth IRA. The clock starts on January 1 of the year you open your first Roth account. If you open a Roth in March 2024, your five-year period ends on December 31, 2028. After that date, you can withdraw earnings tax-free (assuming you are also 59½).
If you convert money from a traditional IRA to a Roth, a separate five-year clock starts for that converted amount. You can withdraw the original contribution amount from a conversion anytime, but the earnings on that conversion must wait five years from the conversion date. This applies even if you already owned a Roth IRA for longer than five years.
Early withdrawal exceptions that avoid the 10 percent penalty
The IRS allows you to withdraw earnings from a Roth IRA before age 59½ without the 10 percent penalty in a few specific situations. You still owe income tax on the earnings, but not the penalty. These exceptions include a first-time home purchase (up to $10,000 lifetime), medical expenses that exceed 7.5 percent of your adjusted gross income, disability, and medical insurance premiums while unemployed.
You can also withdraw earnings penalty-free to pay for may have access to education expenses for yourself or a family member, or to cover costs related to childbirth or adoption. In all cases, you still owe income tax on the earnings portion. The penalty waiver does not mean the withdrawal is tax-free — it only removes the 10 percent fee.
Roth conversions and the tax bill in the year you convert
When you convert money from a traditional IRA, SEP IRA, or straightforward IRA to a Roth, you must pay income tax on the converted amount in the year of the conversion. This is because traditional IRAs hold pre-tax money, and moving it to a Roth means that money is now being taxed. If you convert $50,000 and your tax bracket is 24 percent, you owe roughly $12,000 in federal income tax that year.
Many people convert in years when their income is lower or they expect to be in a lower tax bracket. After the conversion, the money sits in the Roth and grows tax-free. You can withdraw the amount you converted (your basis) after five years without penalty, even before age 59½. The earnings on that converted money follow the normal Roth rules — tax-free after 59½ and five years of ownership.
What you report on your tax return
You do not file a tax return for the Roth IRA itself. Instead, you report Roth activity on your personal tax return. If you make a may have access to withdrawal (age 59½ and five years of ownership), you do not report it at all — it is completely tax-free. If you make an early withdrawal of earnings, you report the taxable portion on Form 1040 as ordinary income.
If you convert a traditional IRA to a Roth, you report the conversion on Form 8606 and include the taxable amount on your Form 1040. Your financial institution will send you a Form 5498 showing your Roth contributions and conversions for the year. Keep records of all contributions and conversions so you can prove your basis if you withdraw early.
State taxes and Roth withdrawals
Federal income tax is only part of the picture. Some states tax retirement account withdrawals, and others do not. States that do tax Roth withdrawals generally follow the federal rule: may have access to withdrawals are tax-free, and early withdrawals of earnings are taxable. A few states — including Pennsylvania, Illinois, and Mississippi — do not tax retirement income at all, so Roth withdrawals would be tax-free there regardless of age or account tenure.
Check your state's tax rules before planning a large Roth withdrawal. If you are considering moving to a different state in retirement, the tax treatment of your Roth account may be one factor in that decision. Your state tax return will show any taxable Roth withdrawal income separately from your federal return.
Frequently Asked Questions
Can I withdraw my Roth contributions without paying taxes or penalties?
Yes. You can withdraw the money you contributed to a Roth IRA at any time, at any age, with no taxes or penalties. The IRS considers contributions your own money since you already paid tax on it. Only earnings are subject to the age and five-year rules.
What happens if I withdraw Roth earnings before age 59½?
You owe federal income tax on the earnings at your ordinary tax rate, plus a 10 percent penalty. The penalty applies only to the earnings portion, not your contributions. Some exceptions (first-time home purchase, disability, education costs) waive the penalty but not the income tax.
Do I have to be 59½ to withdraw from my Roth IRA?
You must be 59½ to withdraw earnings tax-free. Contributions can come out at any age. If you withdraw earnings before 59½, you owe taxes and usually a 10 percent penalty unless a specific exception applies.
If I convert a traditional IRA to a Roth, when can I withdraw that money?
You can withdraw the amount you converted after five years from the conversion date, without penalty, even before age 59½. The earnings on that converted money must wait until you are 59½ and five years have passed since you opened your first Roth account.
Do I report Roth withdrawals on my tax return?
may have access to withdrawals (age 59½ and five years of ownership) are not reported — they are completely tax-free. Early withdrawals of earnings are reported as ordinary income on Form 1040. Conversions are reported on Form 8606 in the year they occur.