Looking for a tax strategy that can also benefit your retirement? Look no further than the Roth IRA, an efficient way to build a tax-free retirement. Unlike traditional IRAs, money in a Roth IRA grows in the absence of any associated taxes (learn more about Roth vs. traditional IRAs here) as a compelling option for those looking to maximize savings while minimizing their tax burden during retirement.

That said, it's essential to understand the Roth IRA 5-year rule (also known as the Roth IRA “aging rule”)—outlining when you can access funds without incurring unexpected penalties and applying to Roth IRA earnings, traditional IRA conversions, and inherited Roth IRA accounts—to help avoid costly mistakes.

What is the Roth IRA 5-year rule?

The Roth IRA 5-year rule essentially states when you’re allowed to make Roth IRA withdrawals without the burden of penalties or taxes, specifically that you can’t withdraw the earnings portion from an IRA unless at least five years have passed since you made your initial contribution to the account. This applies to the following situations:

Withdrawing Roth IRA earnings

As making Roth IRA withdrawals earlier than you should can trigger taxes and penalties, the 5-year rule helps determine when said gains are tax-free.

Converting money from a traditional IRA

If you roll over funds from a traditional IRA to a Roth IRA (i.e., a Roth conversion), the 5-year rule dictates when you’re allowed to withdraw the money without further taxation.

Inheriting an IRA

The 5-year rule dictates when the earnings portion on distributions is tax-free for beneficiaries.

We’ll explore each of these scenarios in more detail in the sections that follow.

Roth IRA withdrawal basics

Here’s a quick recap of Roth IRS regulations regarding distributions (withdrawals):

· You can withdraw contributions to your Roth IRA at any time and any age without taxes or penalties as they were made with after-tax dollars.

· At age 59½, you can withdraw earnings made on your Roth IRA without any taxes or penalties provided your first Roth IRA contribution was made at least five years prior.

The 5-year rule for Roth IRA earnings

Let’s say you've begun contributing to a Roth IRA and have grasped the basics of the 5-year rule.

Looking ahead now, keep in mind that timing is critical—specifically with respect to your initial contribution. Why? Because the 5-year clock begins ticking on January 1 of the tax year you make your initial contribution—regardless of precise contribution timing—meaning you can meet the five-year requirement in less than five years.

For example, if you first contribute in November 2025 (knowing the 5-year clock started ticking on January 1, 2025), you can withdraw your earnings tax-free on January 1, 2030 provided you’re at least 59½ years old.

Should you make your first contribution on April 15, 2026 and designate the contribution for the 2025 year (which is indeed allowed up until tax day of the subsequent year), this too pushes the start clock back to January 1, 2025 and thus results in the same outcome.

Should you have multiple Roth IRAs, the first contribution starts the clock for all of them including any opened in the future (meaning said clock doesn't restart each time you add money). Withdrawing earnings prior to that (or before turning 59½) can trigger taxes and penalties including:

Income taxes on the earnings portion of your withdrawal
A 10% penalty unless you qualify for an exception (discussed later in the article)

The 5-year rule for Roth conversions

Now, let's talk about conversions. Moving money from a traditional IRA to a Roth IRA is referred to as a "Roth conversion," often a clever way to lower your taxes in retirement but also subject to a 5-year rule determining when you can withdraw converted money in the absence of any penalties (note this is separate from the 5-year rule for earnings).

When you convert funds from a traditional IRA to a Roth IRA, you immediately pay taxes on that amount as contributions to your traditional IRA were made with pre-tax dollars. After the money is transferred to your Roth IRA, then, you must wait five years (per the 5-year rule for conversions) to make a withdrawal without penalty. But here’s the tricky part:

Each conversion has its own 5-year waiting period, so if you convert money in different years, each chunk has a separate clock.
As with Roth IRA contributions, the 5-year countdown starts on January 1 of the year you make the conversion (regardless of precise timing during the year). Conversions must occur by December 31 of the calendar year, however, meaning you can’t perform a Roth conversion in April 2026 with a 2025 tax year designation.

To illustrate, let's assume you convert $10,000 from a traditional IRA to a Roth IRA in 2025. By 2028 and when you turn 62, you decide to withdraw the entire amount in the account ($11,000) and won’t face a 10% early withdrawal penalty in doing so—but will still need to pay taxes on the earnings portion ($1,000) since you haven't met the 5-year rule.

So, how can you determine whether you’re withdrawing contributions, conversions, or earnings from your Roth IRA? According to the IRS, withdrawing funds from a Roth IRA assumes the following order: contributions withdrawn first followed by converted balances and, finally, earnings.

The 5-year rule for Roth IRA beneficiaries

Those who inherit a Roth IRA must still satisfy the 5-year rule, withdrawing earnings tax-free only if the account had existed for at least 5 years prior to the death of the original owner (with withdrawals on earnings otherwise taxed). It’s a complex matter, especially for beneficiaries required to deplete the account within 10 years.

The 5-year rule for employer-sponsored Roth plans

If you own a Roth 410(k), Roth 403(b), or Roth 457(b) plan through your employer, the five-year clock also starts on January 1 of the year in which you make your first contribution—each plan with its own 5-year holding period.

Furthermore, you can’t withdraw only contributions prior to the fifth year on these accounts (as you can with Roth IRAs) because the IRS assumes any withdrawal from these types of accounts is a mix of contributions and earnings.

Exceptions to the Roth 5-year rule

Fortunately, some exceptions mean it is in fact possible to skirt early withdrawal fees as well as the 5-year rule. These include…

Buying your first home

You can withdraw up to $10,000 in earnings in the absence of any taxes or penalties if you're buying your first home (or haven't owned a home in the two years prior to purchasing a new one).

Paying for qualified higher-education expenses

Need money for college tuition, books, or fees, either for yourself or a child or grandchild? You can make a withdrawal to cover these costs with no early withdrawal penalty.

Paying for medical expenses

If you have unreimbursed medical bills exceeding 7.5% of your income or are jobless but need to pay for health insurance premiums, you can withdraw money without penalty.

Tips for managing the Roth 5-year rule

While the Roth IRA 5-year rule may seem tricky, you can indeed stay on top of it with a little planning. First and foremost, be sure to keep track of your contribution and conversion dates as different contributions and conversions follow separate 5-year clocks. Maintaining good records is crucial and involves…

Knowing when you made your first contribution and that the 5-year countdown starts on January 1 of that year (even if you contributed towards the end of the same).
Tracking each Roth conversion separately, knowing every conversion has its own 5-year waiting period so you’ll want to avoid mixing them up.
Reviewing your IRA statements on an annual basis even though many financial institutions track your Roth IRA start date (it's always smart to double-check).

Furthermore, if you want to tap into your Roth IRA prior to retirement, follow this strategic planning advice:

Withdraw contributions first

You can always take out the money you put in without taxes or penalties.

Wait at least 5 years for converted funds

Pulling out converted money too soon can trigger a 10% penalty, even if you're over 59½ years old.

Think about your tax bracket

Plan on converting funds? Spread this over many years to help avoid a big tax bill all at once.

Watch out for required inherited Roth IRA withdrawals

If you inherit a Roth IRA, know your options to maximize tax benefits.

In sum: the Roth 5-year rule

The Roth IRA 5-year rule may seem like a minor detail, but it’s in fact crucial for keeping withdrawals free from taxes and penalties and applies to contributions, conversions, and inherited Roth IRAs—each with its own timeline. While withdrawing funds too soon can subject earnings to taxes or penalties, exceptions do exist (e.g., for first-time home purchases and qualified education or medical expenses). Be sure to keep track of your contribution and conversion dates and plan withdrawals strategically to maximize tax-free benefits.

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Understanding the Roth IRA 5-Year Rule