You typically pay no taxes on Roth IRA withdrawals in retirement

The main point: you do not pay federal income tax when you withdraw money from a Roth IRA in retirement, as long as the account has been open for at least five years and you are at least 59½ years old. The money you put in (called contributions) was already taxed before it went into the account, so the IRS does not tax it again when you take it out. The earnings—the investment gains on top of your contributions—also come out tax-free under those same conditions.

This is the opposite of a traditional IRA, where you get a tax deduction when you contribute but pay income tax on everything you withdraw later. With a Roth, you pay the tax upfront and then never again.

Key Takeaways

  • Withdrawals from a Roth IRA are tax-free in retirement if the account is at least five years old and you are at least 59½.
  • You can withdraw your contributions (the money you put in) at any time without tax or penalty, even before retirement.
  • Withdrawing earnings before age 59½ or before the five-year mark usually triggers income tax and a 10 percent penalty, unless you meet a narrow exception.
  • You never have to take withdrawals from a Roth IRA during your lifetime, unlike traditional IRAs, which have required minimum distributions.
  • Roth conversions (moving money from a traditional IRA to a Roth) are taxable in the year you convert, even though future withdrawals are tax-free.

The five-year rule and what it actually means

The five-year rule is not about how long you have owned the account—it is about when you first opened any Roth IRA. The IRS counts from January 1 of the year you opened your first Roth account. If you opened one in 2020, the five-year period ends on January 1, 2025, and you can withdraw earnings tax-free starting then (assuming you also meet the age requirement or another exception).

If you have multiple Roth IRAs, they all share the same five-year clock. Opening a second Roth account does not restart the timer. This matters because some people think they can get around the rule by opening a new account—they cannot.

The five-year rule applies separately to Roth conversions. If you convert money from a traditional IRA to a Roth, that conversion starts its own five-year clock. You can withdraw the amount you converted tax-free after five years, but the earnings on that converted money are subject to the age and five-year rules.

When you can withdraw contributions without tax or penalty

Your contributions—the actual dollars you deposited into the Roth—can be withdrawn at any time, at any age, with no tax and no penalty. This is true even if the account is brand new or you are 35 years old. The IRS already taxed that money when you earned it, so it is yours to take back.

The catch is that the IRS does not always know which dollars in your account are contributions and which are earnings. If you have made multiple contributions over the years and the account has grown, you need to track this carefully. The IRS uses a "pro-rata rule" that treats withdrawals as coming out proportionally from contributions and earnings. If your account is 60 percent contributions and 40 percent earnings, a withdrawal is treated as 60 percent contribution (tax-free) and 40 percent earnings (potentially taxable).

Keep records of every contribution you make. The IRS Form 8606 is used to track this, and your Roth IRA custodian (the bank or brokerage holding the account) should also keep records. If you withdraw contributions and the IRS later questions it, you will need proof of what you contributed.

Withdrawing earnings before 59½ or before five years

If you withdraw earnings from your Roth before you turn 59½ or before the five-year period ends—whichever comes later—you owe federal income tax on those earnings plus a 10 percent early withdrawal penalty. The penalty is calculated on the earnings amount, not the whole withdrawal.

There are narrow exceptions to the 10 percent penalty (though not to the income tax). You can withdraw earnings penalty-free if you are using the money for a first-time home purchase (up to $10,000 lifetime), to pay for may have access to education expenses, for a birth or adoption (up to $35,000 in your lifetime under the find 2.0 Act), or if you become disabled or face a medical hardship. Even with these exceptions, you still owe income tax on the earnings.

The exceptions are specific and the IRS enforces them strictly. "First-time home buyer" means you have not owned a home in the past two years, not that you are buying your first house ever. "may have access to education expenses" means tuition, fees, books, and room and board at an accredited school, not student loan repayment. Read the rules carefully before assuming an exception applies to you.

Roth conversions and the tax you owe in the conversion year

A Roth conversion is when you move money from a traditional IRA (or a 401(k) in some cases) into a Roth IRA. The money you convert is treated as income in the year you convert it, and you owe federal income tax on the full amount converted. This is true even though you will never pay tax on that money again when you withdraw it in retirement.

The tax bill is due when you file your return for that year. If you convert $50,000 and you are in the 24 percent tax bracket, you owe roughly $12,000 in federal tax (plus any state tax). Many people convert in years when their income is lower—after retirement, during a sabbatical, or in a year when they had a loss—to keep the tax bill smaller.

After the conversion, the money follows the same five-year and age rules as any other Roth contribution. You can withdraw the amount you converted after five years, but earnings on that converted money are subject to the age and five-year rules.

No required withdrawals during your lifetime

Unlike a traditional IRA, a Roth IRA has no required minimum distributions (RMDs) during your lifetime. You never have to take money out, no matter how old you are. This means your account can keep growing tax-free for as long as you live, and you can leave it to your heirs.

Your heirs will have to withdraw the money eventually—the rules changed in 2023 under the find Act—but they will not owe income tax on those withdrawals if the account was open for five years before you died. This makes a Roth a powerful tool for leaving money to the next generation.

State income tax on Roth withdrawals

Federal tax is only part of the picture. Most states do not tax Roth IRA withdrawals, but a few do. States that tax retirement income include Vermont, Minnesota, and Colorado (under certain conditions). If you live in one of these states, check your state's rules—you may owe state income tax on earnings even though you owe no federal tax.

If you are planning a large Roth conversion or withdrawal, factor in state tax as well as federal tax. Some people move to a state with no income tax before converting, though the IRS looks carefully at conversions that happen right before a move.

Frequently Asked Questions

Can I withdraw my Roth contributions before I turn 59½?

Yes. Contributions can be withdrawn at any age with no tax or penalty. Earnings are a different story—those are subject to tax and a 10 percent penalty if you are under 59½ and the account is less than five years old, unless you meet a narrow exception like disability or first-time home purchase.

What happens if I withdraw earnings before the five-year period ends?

You owe federal income tax on the earnings plus a 10 percent penalty, unless you meet an exception. The exceptions include disability, first-time home purchase (up to $10,000 lifetime), may have access to education expenses, or birth or adoption (up to $35,000 lifetime). Even with an exception, you still owe the income tax.

Do I have to pay taxes on a Roth conversion?

Yes, in the year you convert. The full amount you move from a traditional IRA to a Roth is treated as income and you owe federal income tax on it. After the conversion, future withdrawals are tax-free (assuming you meet the age and five-year requirements).

What if I have multiple Roth IRAs—do they have separate five-year clocks?

No. All your Roth IRAs share the same five-year clock, which starts from January 1 of the year you opened your first Roth account. Opening a second account does not restart the timer. However, Roth conversions have their own separate five-year clock.

Will I owe state income tax on my Roth withdrawal?

Most states do not tax Roth withdrawals, but a few do, including Vermont, Minnesota, and Colorado (under certain conditions). Check your state's rules if you live in a state that taxes retirement income. Federal tax rules do not explore to state tax.