Roth IRA Withdrawal Rules - NerdWallet (2024)

FAQs

Can I withdraw everything from my Roth IRA? ›

You can withdraw contributions you made to your Roth IRA anytime, tax- and penalty-free. However, you may have to pay taxes and penalties on earnings in your Roth IRA.

Specified exceptions for earnings withdrawals

As mentioned above,you can access your Roth IRA earnings tax-and-penalty-free once five years have passed if one of the following has occurred: You've turned 59 ½ You're permanently disabled. You're the beneficiary of an account owner who has passed away.

Once the five-year rule is met and the holder is over 59 1/2, there are no restrictions on how much can be withdrawn tax-free from a Roth IRA. Once past 59 1/2, holders of traditional IRAs may begin taking penalty-free withdrawals.

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The early withdrawal penalty for a traditional or Roth individual retirement account is 10% of the amount withdrawn. Keep in mind that you may also owe income tax in addition to the penalty.

The Bottom Line. If you have a Roth IRA, you can withdraw your contributions at any time and they won't count as income. Also, the account's earnings can be tax free when you withdraw them as long as you are age 59½ or older and have had a Roth account for at least five years.

Note: You are required to report your withdrawals and file Form 8606 with your tax return, even if you take a nontaxable distribution that is equal to or less than your total contributions to all of your Roth IRAs.

The Roth IRA five-year rule says you cannot withdraw earnings tax-free until it's been at least five years since you first contributed to a Roth IRA account. This five-year rule applies to everyone who contributes to a Roth IRA, whether they're 59 ½ or 105 years old.

A “backdoor” Roth IRA allows high earners to sidestep the Roth IRA's income limits by converting nondeductible traditional IRA contributions to a Roth IRA. That typically requires you to pay income taxes on funds being rolled into the Roth account that have not previously been taxed.

A backdoor Roth is a loophole that avoids income limits to be eligible to contribute to a tax-free Roth IRA retirement account. The loophole: Taxpayers making more than the $161,000 limit in 2024 can't contribute to a Roth IRA, but they can convert other forms of IRA accounts into Roth IRA accounts.

What are the new Roth IRA rules for 2024? ›

The Roth IRA contribution limit for 2024 is $7,000 for those under 50, and an additional $1,000 catch up contribution for those 50 and older. Source: "401(k) limit increases to $23,000 for 2024, IRA limit rises to $7,000," Internal Revenue Service, November 1, 2023.

Internal Revenue Service (IRS) rules do not allow you to borrow from a Roth individual retirement account (Roth IRA) in the same way that you can borrow from and repay a 401(k). Early withdrawals of earnings from a Roth IRA (before age 59½) carry a 10% penalty.

Withdrawing over age 59½

If you are over age 59½ and have met the five-year rule, withdrawals from a Roth IRA are penalty and tax-free. This includes any earnings in the account in addition to your original contributions.

Roth IRA contributions can be withdrawn at any time without penalty, but other rules apply to Roth investment earnings. In general, two criteria need to be met for penalty-free withdrawals of all funds from a Roth IRA: the account has been open for at least five years and the account owner is age 59 ½ or older.

Nonqualified withdrawals: If you withdraw conversion contributions before the five-year period is over, you might have to pay a 10% Roth IRA early withdrawal penalty. You usually pay the 10% penalty on the amount you converted that you included in income.

A Roth IRA differs from a traditional IRA in several ways. Contributions to a Roth IRA aren't deductible (and you don't report the contributions on your tax return), but qualified distributions or distributions that are a return of contributions aren't subject to tax.

You won't face any penalties if you simply withdraw your excess contribution plus any income it has earned by the due date for your tax return, including extensions. But you'll have to include the earnings portion in your taxable income for the year.

To discourage the use of IRA distributions for purposes other than retirement, you'll be assessed a 10% additional tax on early distributions from traditional and Roth IRAs, unless an exception applies. Generally, early distributions are those you receive from an IRA before reaching age 59½.