Retirement Taxes

Q&A: When can I take distributions from a Roth IRA?

The contributions into a Roth IRA can be taken from it without penalty or tax anytime. It is the earnings that must stay in a Roth IRA for the later of 5 years from the opening of the account or age 59.5.

Taxes and Penalties on EarningsBefore 5 yearsAfter 5 years
Before age 59.510% penalty and income tax10% penalty and income tax
After age 59.5Income tax, no penaltyNo tax or penalty

However, there are exceptions in which some/all of the taxes and penalties can be avoided. These exceptions are as follows:

  • You use the withdrawal (up to a $10,000 lifetime maximum) to pay for a first-time home purchase.
  • You use the withdrawal to pay for qualified education expenses.
  • You use the withdrawal for qualified expenses related to a birth or adoption.
  • You become disabled or pass away.
  • You use the withdrawal to pay for unreimbursed medical expenses or health insurance if you’re unemployed.
  • The distribution is made in substantially equal periodic payments.

If someone is withdrawing money for one of these exceptions, the following table is what now applies to the withdrawal:

Taxes and Penalties on EarningsBefore 5 yearsAfter 5 years
Before age 59.5Income tax, no penaltyNo tax or penalty
After age 59.5Income tax, no penaltyNo tax or penalty

Real-life Application: Person A contributes $25,000 over a 5-year period to their Roth IRA and it has grown to $35,000. They are 35 years old. Given the circumstances, they are able to take the $25,000 of contributions out whenever, but will need one of the exceptions in order to take the earnings out without penalty *or* tax (as they have had the account for 5 years).

See also:
Compare: Tax differences between brokerage accounts, Roth IRAs, and Traditional IRAs

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