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Roth IRA Withdrawal Rules

The whole point of an IRA (Roth or otherwise) is to save for retirement. Unfortunately, things don’t always go as planned, and you may find yourself needing to withdraw money from your Roth IRA before age 59½.

The most important thing to know is this: Contributions (that is, the money that you put into your Roth) can come out at any time, free of taxes and penalties.

Distributions of Earnings

When it comes to distributions of earnings, however, things get a bit more complicated. That’s why I prepared this handy flowchart (and the following explanations) to help you determine whether or not distributions of earnings will be subject to income taxes and/or penalties. 🙂

Please note, this flowchart only applies to earnings when your Roth does not include any amounts converted from a traditional IRA or other retirement plan. If your Roth does include such amounts, please see “Distributions After a Roth Conversion” below.


Qualifying Reasons for Distributions

The following are the “qualifying reasons for distributions” referenced in the first step of the flowchart:

  • You have reached age 59½.
  • The distribution was made to your beneficiary after your death.
  • You are disabled.
  • You use the distribution to pay certain qualified first-time homebuyer amounts.

5-Year Rule

Any earnings distribution prior to the first day of the fifth year after your first Roth was established will be taxed as ordinary income, at whatever your tax rate is at the time.

Example: You open a Roth IRA on May 18, 2009. The 5-Year Rule is satisfied as of January 1, 2014.

Other Exceptions to 10% Penalty

Even if your distribution is not for a “qualifying reason,” you may be able to escape the 10% penalty (but not ordinary income taxes) if any of the following situations apply:

  • You have unreimbursed medical expenses that exceed 10% of your adjusted gross income.
  • You are paying medical insurance premiums after losing your job.
  • The distributions are not more than your qualified higher education expenses.
  • The distribution is due to an IRS levy of the qualified plan.
  • The distribution is a qualified reservist distribution.
  • The distribution is a qualified disaster recovery assistance distribution.
  • The distribution is a qualified recovery assistance distribution.

All Roth IRAs Are Viewed as One

When applying each of the above rules, the IRS views all of your Roth IRAs together as one big Roth IRA. For example, once you’ve met the 5-Year Rule for one of your Roth IRAs, you’ve met it for all of them. Also, distributions from a Roth will not count as distributions of earnings until you’ve withdrawn an amount greater than the total of all of your contributions to all of your Roth IRAs.

Example: In 2013, you contribute $2,000 to a Roth. In 2014, you open a Roth with a different brokerage firm, and contribute $3,000 to it. By 2015, each Roth has grown to $5,000. You could withdraw $5,000 from either (but not both) of the two Roth IRAs without having to pay taxes or penalties because your total contributions were $5,000 and because the IRS considers them to be one Roth IRA.

Distributions After a Roth Conversion

If, you’ve converted money from a traditional IRA to a Roth IRA, things get slightly trickier.

Any distributions of converted amounts (assuming they were taxable at the date of the conversion) will be subject to the 10% penalty (though they’ll be free from ordinary income taxes) if the distribution occurs less than 5 years after the first day of the year in which the conversion occurred. If, however, the distribution was for a “qualifying reason” or you meet one of the “other exceptions” above, the distribution will be free from penalty.

If the conversion included amounts that were not taxable (because they came from a nondeductible IRA), those amounts will not be subject to the 10% penalty even if they are withdrawn from the Roth prior to the first day of the fifth year after the date of the conversion.

Order of Distributions

According to IRS Publication 590, distributions are assumed to occur in the following order:

  1. Regular contributions.
  2. Conversion and rollover contributions, on a first-in-first-out basis (generally, total conversions and rollovers from the earliest year first). Take these conversion and rollover contributions into account as follows:
    • Taxable portion (the amount required to be included in gross income because of the conversion or rollover) first, and then the
    • Nontaxable portion.
  3. Earnings on contributions.

Example: During 2013, you contribute $5,000 to a Roth IRA. You also convert $20,000 from a traditional IRA into your Roth IRA. Of that $20,000, $13,000 was taxable upon the conversion, and $7,000 was not because it came from nondeductible IRA contributions.

In 2014, you withdraw $8,000 from your Roth. The first $5,000 is free from tax and penalty because it’s a return of your contributions. The next $3,000 is assumed to come from the taxable portion of your converted amount. As a result, it will be free from income tax, but it will be subject to the 10% penalty because the distribution occurred prior to the first day of the fifth year after the date of the conversion.

In 2015, you withdraw another $15,000 from your Roth. The first $10,000 will be the remainder of the taxable portion of the conversion (and will again be free from income tax but subject to the 10% penalty). The remaining $5,000 will be considered to have come from the nontaxable portion of the conversion, and it will be free from both tax and penalty.


Admittedly, things can get a bit tricky. Hopefully this helped to clear things up. 🙂

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  1. Any idea what happens to the 5-year rule when you switch brokerages? I know I still have some paperwork for my first Roth IRA account opening way back when, but what if I decided to move my entire Roth IRA into a new broker account and it now shows that my account and initial deposit as 5 days old?

  2. Shouldn’t be a problem. According to IRS Publication 590, you’ve satisfied the 5-year rule as long as the distribution is made “after the 5-year period beginning with the first taxable year for which a contribution was made to a Roth IRA set up for your benefit.”

    It’s just “a Roth IRA” not “the Roth from which you’re withdrawing money.”

  3. Hi Mike,

    This is a very good review of Roth IRA distributions. I think what many people often forget is that contributions can come out at any time, free of taxes and penalties. Thanks for the great explanation of the rules.

  4. Aaron Margeson says:

    Would love to see a discussion about using Roth IRA’s as an emergency fund. Right now, I can’t fully fund my Roth IRA AND continue to build an emergency fund. I was thinking about contributing to a Roth IRA in an account that’s suitable for an emergency fund like a money market account to get my $5000 contribution in before the end of the year. Down the road, I will eventually have funded my emergency fund, some of which is in Roth IRA’s. I could then begin funding a separate account as an actual emergency fund and move money from the funds marked as Roth IRA’s into other Roth IRA accounts more suitable for retirement. If for example it takes two years to fully fund my target for an emergency fund, I’d have an extra $20K declared as Roth IRA’s between both my wife and I, which could make a pretty good sized difference in the long run.

  5. Aaron, your plan is an excellent one. In fact, I’ve suggested exactly such a strategy for two friends before when they weren’t sure they could contribute to a Roth.

    Added bonus: If you qualify for the retirement savings contribution credit, this is a way to make sure you get to take advantage without having to put money at risk.

  6. Mike,

    I always though that ALL distributions were tax free (age appropriate), including the earnings.

    Did the rules change?

  7. Mark, for a distribution of earnings to be tax free, it must be a qualified distribution. From IRS Publication 590:
    A qualified distribution is any payment or distribution from your Roth IRA that meets the following requirements.

    1. It is made after the 5-year period beginning with the first taxable year for which a contribution was made to a Roth IRA set up for your benefit, and
    2. The payment or distribution is:

    • Made on or after the date you reach age 59½,
    • Made because you are disabled,
    • Made to a beneficiary or to your estate after your death, or
    • One that meets the requirements listed under First home under Exceptions in chapter 1 (up to a $10,000 lifetime limit).


  8. OK. So if the account holder is past 59 1/2, and if the account has been open five years, then all distributions are tax free.

    That was my understanding.

  9. Hi, I am busy helpin my kids school establish a capital fund to ensure their long term survival. We need to define the (few and narrow) rules for any withdrawals from such a fund (main principle being that, eventually, it will be the proceeds from interest, etc. which will support the school).

    Would you have any good ideas/inspiration for what such rules can/should be? You seem to be “jacked” when it comes to this area.

    Many thanks,

  10. Hi Michael.

    It seems to me that the two biggest decisions in such a scenario are a) asset allocation and b) safe withdrawal rate (and circumstances under which said rate should be changed).

    I’d just start with Googling “safe withdrawal rate,” and reading up on it. Most people say 4% is a reasonable rate. But that assumes a finite length of time (i.e., an investor’s retirement). In your scenario, the rate will have to be lower.

    There should also probably be built-in provisions regarding when the rate needs to be dropped even further in case of poor investment results so as to ensure the fund is not depleted.

  11. I am age 59 as 0f october 09. Have Roth IRA first contirbuted in 12.04, and then again in 2005, none since. I want to withdraw my contributions, I know of the 5 year rule and I beleive I have met that on 1/09. Since I want my contributions only can I have them without being taxed, I don’t think the contributions are? If not what about the 10% penalty?
    Funds are to be used for normal use ie bills and new auto?
    Thank you for you kind attention to my question.

  12. Mike, to the best of my knowledge, as long as there are no traditional-IRA-to-Roth-IRA conversions involved, contributions can come out at any time, free of tax and free of penalty.

  13. Here’s the issue that has both myself and my accountant confused. It pertains to the issue of Distribution after a Roth conversion and penalties upon withdrawal.

    Assume I am over 60 yrs old. I have a regular IRA worth approx 250G which in 2010 I would like to convert to a Roth IRA (could not do it before due to income limitations). The IRA was funded with pretax money so I realize that I must pay taxes on the full 225G , this amount being due in 2011 and 2012. The IRA is invested in an income producing debt instrument which is set up to pay me monthly income.

    Once I convert in 2010 it was my understanding that the first $225G I take out of the account will not be subject to taxation as it will be considered to be my contribution and I am already going to be paying taxes on that amount per the conversion. However, from reading this article it appears that I may have to pay an additional 10 percent penalty as my Roth IRA will be opened less that 5 years. However I am reading other things that says return of your contribution is never subject to penalty. Can someone clarify. Thanks.

  14. I see what you are saying ” you must pay the 10% additional tax on the taxable part of any distribution”. Well my take is this 10% of distributions that are not taxable is 0,cause the distributions are not taxable, since they only involve contributions only.???

  15. Mike

    I’m sorry. Didn’t understand your response. Some typos and too many question marks. Can you repeat

  16. Hi JSimon.

    Sorry for the delay in replying. I was out of town visiting family for Thanksgiving and am just now getting caught up. (The above Mike–the one whose comments don’t appear in blue–is a different Mike.)

    My understanding is as follows:

    Unless you’ve satisfied the 5-year rule (or one of the “other exceptions”), converted amounts from a deductible IRA will be subject to the 10% penalty. That is, converted amounts are treated somewhat differently from regular Roth contributions.

  17. Mike
    No prior Roth IRAs. So you are saying that if I am over 60 yrs old and convert to a Roth IRA in 2010, and pay my taxes on the converted amounts, I will still be charged a penalty for taking out any amounts equal to or less than my contribution into the original IRA until 5 years have gone by? The reason I’m questioning is that I had heard that you can always take out of the account your own contributions without penalty.

  18. Mark Davis says:

    Hello Mike,

    These questions and answers are very helpfull. I’m 45 yrs old and have 148,000 in a traditional IRA. If I convert to a Roth, after 5 yrs when I’am 50, if I take a distribution will I be charged the 10% penalty? Do I have to wait until I’m 591/2 before that goes away? Any book you would recommend on Roth conversions that is easy to understand?

    Thanks for your help,

    Mark Davis

  19. JSimon:

    I’m sorry, I hadn’t noticed that you mentioned you’re over age 59.5. In that case, I believe the 10% penalty would not apply (though my certainty is less than 100%).

    The reason, by the way, that Roth conversion amounts are not treated the same as regular contributions is to prevent people from using Roth conversions as a way around the 10% penalty for traditional IRAs.

    That is, if Roth conversions were treated exactly like regular Roth contributions, a person under age 59.5 could simply convert his traditional IRA to a Roth and withdraw it right away, thereby getting around the 10% penalty that he would have paid if he’d taken it directly out of the traditional IRA.

  20. Mark Davis:

    My understanding is that if you wait 5 years after the conversion, you’ll avoid the 10% penalty.

    And unfortunately, I don’t know of any books about Roth conversions. (If anybody else has a recommendation, please share it!)

  21. Mark
    I think I can answer yours. If your under 59 1/2 you will be charged a penalty. We will however await Mike as I’m still awaiting further clarification on mine as well. It just doesn’t make sense to me that I can’t take my own contribution after age 59 1/2 without a penalty.

  22. Mike

    It sounds like your agreeing with me but not sure. Is there any way to confirm this one way or another as I can’t seem to get a strong yes or no from anyone.

  23. JSimon, you could always try contacting the IRS directly. That said, I’ve had IRS service reps give me information that I know was inaccurate. If you do call them, I’d suggest keeping records of who you talk to, when you talk to them, and what they said.

  24. pat dauria says:

    I am currently 52 years old.
    I opened a Roth IRA mutual fund in 3/99 for $2,000.
    The only further contribution I made to this account was $250 (in early 2000)
    I just closed the account (12/7/09) and have a check coming for the amount of $1,970.
    Since this amount is less then the amount I contributed ($2,250)then I should not have to pay taxes or penelties for “early withdrawl”.

  25. Correct. If you’ve taken no distributions yet, a distribution in the amount of $1,970 would be tax and penalty free given that you’ve made contributions of $2,250.

  26. pat dauria says:

    OK, that sounds good.
    Now…since I distributed $2,250 and only redeemed $1,970 (the total amount left in the account) then I am able to claim a loss for the difference in my 2009 taxes.
    …and thanks for the quick response…

  27. Pat:

    First, a clarification of terminology to make sure we’re on the same page:
    Distributions are the amounts you take out of the IRA.
    Contributions are the amounts you put into the IRA.

    As to claiming a loss on investments in a Roth IRA: Yes, it’s possible in some circumstances. In your situation, however, it’s likely that you won’t be able to.

    From IRS Publication 590:
    “If you have a loss on your Roth IRA investment, you can recognize the loss on your income tax return, but only when all the amounts in all of your Roth IRA accounts have been distributed to you and the total distributions are less than your unrecovered basis.” (Unrecovered basis = the amount of your contributions.)

    Also (and this is the part that will probably prevent you from deducting it), the deduction for losses in a Roth IRA is a “miscellaneous itemized deduction,” which means you can only deduct it to the extent that it exceeds 2% of your Adjusted Gross Income.

  28. pat dauria says:

    very good information…thank you for your time and expertise….and as you can tell from my questions I truely am oblivious…h3ll, I’ve only been investing money for 30 years.

  29. Hi,
    I am 53 years old and getting ready to pay for college for daughter. Financial aid wasn’t enough and I don’t want us to have a bunch of loans. I need about 40k. If I take it out I will be penalized, but if I borrow against my retirement plan and then pay then in one lump sum when I hit 591/2, does that make more sense?

  30. follow up-I meant can I take my roth ira and then use it to pay off my loan, would that make more sense? (Sometimes I confuse myself)

  31. Maria: From the IRS’s website:

    “The loan must be repaid within 5 years, unless the loan is used to buy the participant’s main home. The loan repayments must be made in substantially level payments, at least quarterly, over the life of the loan.”

    It seems to me that if you’re set on not taking out any loans, it might make more sense to simply use Roth money (at least to the extent of your Roth contributions) to pay the education expenses in the first place.

  32. It is possible that you may have already addressed the concerns I am raising here; for some reason I am still not very clear if the rule re. each conversion having its own 5-yr clock. I will certainly appreciate your addressing the particular case I have outlined below.

    I am 60 yrs old. I opened my first Roth in 2005. I have contributed to the Roth regularly every year since. In 2008 and 2009 I also converted some funds from the Rollover IRA.
    My Question: Since I am past 59 ½ and will have had my first Roth open for 5 year by Jan 2010, will my distribution (both the contribution and the earnings on the converted/contributed amounts) be considered qualified distribution in 2010 and beyond? Or do the earnings on the converted asset have to meet the five-year clock before I withdraw them tax and penalty free?

  33. Hi S.Max.

    My understanding is that if you are over 59.5 and you’ve had a Roth open for more than 5 years, any distribution will be a qualified distribution and will therefore be free from tax and penalty.

    For more information see “Are Distributions Taxable?” and “What Are Qualified Distributions?” from IRS Publication 590.

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