What Age Must a Roth IRA Owner Be for Tax-Free Withdrawals?

A Roth Individual Retirement Arrangement (IRA) is a retirement savings account allowing for tax-free growth and withdrawals. Contributions are made with after-tax money, which is what enables its tax-free status in retirement. To access these funds completely free of taxes and penalties, certain requirements must be met.

The Two Requirements for Qualified Distributions

For a withdrawal from a Roth IRA to be a “qualified distribution,” meaning it is entirely free from both income tax and penalties, two conditions must be met. The first is that the owner must be at least 59½ years old at the time of the distribution.

The second condition is the 5-year holding period rule, requiring that five years have passed since the owner first contributed to any Roth IRA. The clock for this five-year period begins on January 1 of the tax year for which the first contribution was made. For example, if a first contribution for the 2024 tax year is made in April 2025, the clock starts on January 1, 2024.

Both the age 59½ rule and the 5-year rule must be satisfied for the earnings portion of a withdrawal to be tax-free. If an individual is over 59½ but has not yet met the five-year holding requirement, any earnings withdrawn will be subject to ordinary income tax, though the 10% early withdrawal penalty is waived due to age.

The five-year clock is established with the first contribution to any Roth IRA and does not reset with subsequent contributions or new accounts. Once this period is satisfied for an individual, it is satisfied for all Roth IRAs they own.

Understanding the Withdrawal Ordering Rules

The IRS has established a specific order for how money is taken from a Roth IRA, which has significant tax implications. This sequence is not optional, and all distributions are deemed to follow these rules.

The first money withdrawn is always your direct contributions. Since these were made with after-tax dollars, they can be withdrawn at any time for any reason, free of taxes and penalties. This applies regardless of your age or how long the account has been open. For example, if you contributed $30,000, you can withdraw that amount without tax liability.

After all direct contributions have been withdrawn, the next money to come out is any amount that was converted from a traditional IRA. To avoid a 10% penalty, the taxable portion of each conversion must be held for five years. This rule applies separately to each conversion event, meaning each transaction starts its own five-year clock for penalty-avoidance purposes.

Investment earnings are considered withdrawn only after all contributions and converted amounts have been distributed. This portion is subject to taxes and penalties if a withdrawal is non-qualified. For instance, if an account holds $50,000 in contributions, $10,000 in conversions, and $15,000 in earnings, a $55,000 withdrawal is treated as a tax-free return of all contributions and a $5,000 withdrawal of converted funds, leaving the earnings untouched.

Exceptions to the 10% Early Withdrawal Penalty

Even if a withdrawal of earnings is non-qualified, you may be able to avoid the 10% early withdrawal penalty in certain situations. Avoiding the penalty does not eliminate the income tax due on the withdrawn earnings. The earnings are still taxed as ordinary income if the distribution is non-qualified.

Common exceptions to the 10% penalty include:

• First-time home purchase: Up to a lifetime maximum of $10,000 may be withdrawn from earnings penalty-free to buy, build, or rebuild a first home.
• Qualified higher education expenses: Withdrawals for qualified higher education expenses (tuition, fees, books) for the owner, their spouse, children, or grandchildren are penalty-free.
• Birth or adoption: Up to $5,000 can be withdrawn penalty-free within one year of a child’s birth or the finalization of a legal adoption.
• Disability or death: Distributions are penalty-free if the owner becomes totally and permanently disabled or if made to a beneficiary after the owner’s death.
• Medical expenses: Withdrawals for unreimbursed medical expenses that exceed 7.5% of your adjusted gross income are penalty-free.
• Health insurance: Funds used to pay for health insurance premiums while unemployed are not subject to the penalty.
• Substantially equal periodic payments: Taking distributions as a series of substantially equal periodic payments can avoid the penalty.