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How to Make Roth IRA Withdrawals Tax- and Penalty-Free

Roth IRA

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Updated December 20, 2023

Roth IRAs work in almost the exact opposite fashion of traditional IRAs in terms of the tax and penalty rules surrounding account withdrawals. Money is contributed to a Roth IRA on an after-tax basis. If the contribution requirements are met, then the withdrawals will be tax and penalty free. However, there are important caveats.




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Roth IRA contributions vs. earnings

As with a traditional IRA, Roth IRAs can accept annual contributions. The investments held in the Roth IRA may generate earnings and gains over time.

RELATED: Best Roth IRA Accounts

The annual contribution limits for IRAs in total apply to Roth IRAs. For 2022 and 2023 these contribution limits are:

Contribution limit under 50 years old
Catch-up contributions for those 50 or older

These contribution limits are in total for all types of IRA accounts. For example, for 2023 you could contribute $3,250 each to a traditional IRA and to a Roth IRA if you are under age 50.

In order to be able to contribute to a Roth IRA or any type of IRA you must have earned income from employment or self-employment. You cannot contribute an amount greater than the amount of your earned income for the year. If you earn $5,000 for the year, this is the maximum amount that you can make as total IRA contributions.

Money inside of the Roth IRA, whether the source was direct contributions, money converted for a traditional IRA or money rolled over from a workplace retirement plan like a 401(k), can be invested in things like stocks, bonds, mutual funds, ETFs and other types of investments. Over time the balance in the Roth IRA hopefully will grow due to gains in the value of these investments plus any interest, dividends or capital gains that have been accrued in the account. A tax-efficient financial plan like those created by Playbook can help you with this process. All of the growth in the account is considered earnings.

While the value of your contributions to a Roth IRA can be withdrawn tax-free at any time, the portion of the account pertaining to gains can only be withdrawn without taxes and/or penalties if you are eligible to make qualified withdrawals from your Roth IRA.

The rules surrounding the potential taxes and penalties connecting with a Roth IRA can be complex. You might consider working with a financial advisor knowledgeable in using Roth IRAs.

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Roth IRA income limits

The ability to contribute to a Roth IRA is limited by your income. For the 2022 and 2023 tax years, the income limits based on a taxpayer’s adjusted gross income (AGI) are:

Filing status2022 modified AGI limits2023 modified AGI limitsContribution limits
Married filing jointly and qualifying widow(er)
Less than $204,000
Less than $218,000
No contribution limits
$204,000 to $214,000
$218,000 to $228,000
Reduced, phased out
$214,000 or more
$228,000 or more
No contributions allowed
Single, head of household or married filing separately (if you did not live with your spouse at any point during the year)
Less than $129,000
Less than $138,000
No contribution limits
$129,000 to $144,000
$138,000 to $153,000
Reduced, phased out
$144,000 or more
$153,000 or more
No contributions allowed
Married filing separately (if you lived with your spouse at any point during the year)
Less than $10,000
Less than $10,000
$10,000 or more
$10,000 or more
No contributions allowed

The five-year rule

The five-year rule is one of the most important concepts regarding Roth IRAs. The five-year rule is one of the key factors in determining whether a withdrawal from a Roth IRA is qualified, meaning that it is tax and penalty free.

The five-year rule starts on January 1 of the tax year in which you make your first Roth IRA contribution. Age doesn’t matter in satisfying the five-year rule. If your first contribution is at age 60, then that is when the clock starts on the five-year rule for you.

There is a separate five-year rule for each Roth IRA conversion made. You must wait at least five years from the year in which the conversion was made to be able to take a qualified distribution of the money pertaining to that conversion.

For inherited Roth IRAs, the five-year rule must be satisfied by the original account owner prior to their death. This is critical in the case of Roth IRAs passed on to non-spousal beneficiaries who do not qualify as eligible designated beneficiaries. If the five-year rule was met by the account owner prior to their death, then the beneficiaries of an inherited Roth IRA will be able to withdraw funds tax-free. This is critical with the onset of the Secure Act in 2020.

Qualified distributions

Qualified distributions are taken with no income taxes or penalties. In order to be classified as a qualified distribution, the following requirements must be met according to the IRS.

The five-year rule on the account must be met and the distribution is:

  • Made on or after you reach age 59 ½.
  • Made due to the disability of the account holder.
  • Made to account beneficiaries after the death of the account holder.
  • Meets the requirements under the first home buyer exemption.

Non-qualified distributions

Non-qualified Roth IRA distributions are those that don't meet the IRS requirements for qualified distributions. When making a non-qualified distribution from your Roth IRA you will pay taxes on the portion of the distribution that is allocated to earnings in the account, plus a 10% penalty.

There are exceptions that will allow you to avoid the 10% penalty on non-qualified distributions.

  • Taking the distributions as a series of substantially equal distributions under the rules for this type of distribution.
  • To cover unreimbursed medical expenses in excess of 7.5% of your adjusted gross income.
  • The payment of medical insurance premiums after losing your job.
  • If the distribution is for the purpose of paying an IRS levy.
  • Distributions in connection with qualified service as an armed forces reservist.
  • Distributions in connection with a qualified disaster recovery.
  • Distributions to pay for qualified educational expenses.
  • To cover up to $5,000 of the costs of childbirth or adoption.

Withdrawing under age 59½

You can always withdraw the original contributions made to your account at any age without incurring taxes or a 10% early withdrawal penalty. If you withdraw any of the earnings in the account, your withdrawal may be subject to taxes and/or a 10% early withdrawal 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.

If you are over age 59½ and have not met the five-year rule, then your withdrawals will generally be taxed, but there will be no penalties.

Here is a chart summarizing the Roth IRA withdrawal rules for those who are both over and under age 59½.

Age5-year rule metTaxes/Penalties on withdrawalsExceptions
59½ or over
59½ or over
Taxes on earnings but no penalty
Under 59½
Taxes on earnings and a 10% penalty. Both may be avoided if the withdrawal is due to a qualified exception.
First time home purchase or remodeling as specified in the rules. Due to a disability for the account owner.Payments made to the account holder’s beneficiaries or their estate upon their death.
Under 59½
Taxes on earnings and a 10% penalty. You might be able to avoid the penalty due to a qualified exception, but not the taxes.
First time home purchase as specified in the rules. Due to a disability for the account owner. Health insurance premiums while unemployed. Unreimbursed medical expenses within the limits. Higher education expenses within the limits. Inheriting an IRA. Series of substantially equal periodic payments. To pay an IRS levy.Qualified military reservists called to active duty.Costs related to the birth or adoption of a child up to specified limits.

It’s important to note that the contributions made to the Roth IRA account can always be withdrawn tax and penalty free. However, the earnings on those contributions may be subject to taxes and/or penalties as discussed above.

Frequently asked questions (FAQs)

Should I withdraw from my Roth IRA?

Whether or not you should take a withdrawal from your Roth IRA depends upon your own unique circumstances and your needs. Here are some pros and cons of withdrawing money from your Roth IRA.


  • Your own contributions can be withdrawn tax and penalty-free.
  • You can withdraw earnings if you have met the criteria for a qualified withdrawal or under certain exemptions.
  • Withdrawing from the Roth IRA versus taking a loan to meet a financial need will save you the costs of any interest that you would pay on the loan.


  • Withdrawing earnings from the Roth IRA will incur taxes and possible penalties if you have not met the requirements for a qualified withdrawal.
  • Unlike with a loan, the money cannot be repaid back into the Roth IRA. Once it is withdrawn it's gone from the account.
  • You will miss out on future tax-free earnings and growth in the account.

Is there an RMD for a Roth IRA?

There are no required minimum distributions (RMDs) for Roth IRAs. This is one of the advantages of using Roth IRAs.

Should I keep cash in my Roth IRA?

Since you are able to withdraw amounts equal to the amount of Roth IRA contributions you have made, you can withdraw cash from the Roth IRA if needed prior to age 59½ without tax or penalty as long as they don’t exceed the amount of your contributions to the account.

However, once this cash is withdrawn it cannot be put back into the Roth IRA at a later time and any future growth potential is gone. It is generally better to save cash as part of an emergency fund or other reserves in a liquid, taxable account such as a savings or money market account.

Can I get money from my Roth IRA before retirement?

You can withdraw your contributions to the Roth IRA at any time without incurring any taxes or penalties. If you need to withdraw a larger sum that would eat into the earnings in the account, you would be subject to taxes and a penalty, except if you qualify for certain exemptions, unless the withdrawal met the criteria for a qualified withdrawal.

If you are working past age 59½, and meet the other criteria for a qualified withdrawal, then it might make sense to withdraw funds from your Roth IRA as part of your overall retirement withdrawal strategy even if you are still working. This will vary based on your own unique situation, it can make sense to consult with a financial advisor to discuss this.

Can I use my Roth IRA as life insurance?

There are characteristics of Roth IRAs that can allow you to use a Roth IRA as a form of life insurance. These include the ability to pass the Roth IRA to beneficiaries tax-free if the five-year rule is satisfied. Starting a Roth IRA at a young age and letting the assets in the account grow can be a good way to cover your own funeral expenses.

One major difference is that the death benefit of a life insurance policy is generally guaranteed. The value of the Roth IRA will fluctuate depending upon how the account is invested.

Are there alternatives to withdrawing from a Roth IRA?

The alternatives to withdrawing funds from your Roth IRA will depend upon your own situation. Options can include a taxable account, a savings or money market account or other sources of cash. Again this will depend upon your own individual situation.

Can I borrow from a Roth IRA to buy a house?

You are not allowed to borrow against an IRA whether the account is a Roth or traditional IRA. In the case of a Roth IRA you can withdraw the amount contributed to the account without taxes or penalties, but this is not a loan. Once this money is withdrawn it is gone from the account.

There is a provision that allows first time homebuyers to withdraw up to $10,000 penalty-free, but not tax free if they are under age 59 ½ or have not met the requirements for a qualified withdrawal.

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