A Roth IRA — IRA is short for individual retirement account — is a popular retirement savings tool, especially among young workers. One thing that makes Roth IRAs so popular is their unique and flexible withdrawal rules. The money in your Roth IRA is more accessible than in other retirement accounts. However, it’s important to understand the withdrawal requirements and the repercussions of early withdrawals.

Roth IRA basics

A Roth IRA is a type of individual retirement account that allows you to save for retirement outside of an employer-sponsored plan.¹ Roth IRA contributions are non-deductible, meaning there’s no tax advantage up front. However, your money will potentially grow tax-free in your account, and you’ll be eligible for tax-free withdrawals of earnings if certain requirements are met.

You can contribute up to $7,000 per year to a Roth IRA in 2023, up from $6,500 in 2023. If you’re 50 or older, you can contribute an additional $1,000 per year.² Though Roth IRAs do have income limits in place so that high earners can’t contribute, most people can take advantage of this type of account.³

Read more: Roth IRA contribution limits 2023

Once you’ve contributed money to your Roth IRA, you can invest it in a variety of different securities, including stocks, bonds, mutual funds, exchange-traded funds (ETFs), and more. These investments will help your retirement contributions potentially grow exponentially through compounding by your retirement date.

Flexibility of Roth IRA withdrawals

One of the most attractive features of a Roth IRA is its flexible withdrawal rules. Unlike most tax-advantaged retirement accounts, the Roth IRA allows you to access certain money at any time, while other withdrawals must meet stricter requirements.

Withdrawing Roth IRA contributions

You can withdraw your Roth IRA contributions at any time, tax-free and penalty-free. You’ve already paid income taxes on the money you’ve contributed to your Roth IRA. As a result, any withdrawals that are a return of your contributions have no tax consequences.

For example, suppose you contribute the full $7,000 to your Roth IRA in 2024. However, in 2025, you run into financial hardship and need some extra cash. You decide to withdraw money from your Roth IRA. You can withdraw some or all of that same $7,000 without paying any taxes or penalties.

Withdrawing Roth IRA earnings

As we’ve mentioned, the rules for withdrawals of Roth IRA contributions are quite flexible and allow you to access that money at any time without penalties. However, the same can’t be said for any investment earnings.

To withdraw investment earnings, you must meet the following requirements:⁴

1. It’s been at least five years since the start of the tax year of your first contribution.
2. One of the following is true:
   1. You’re at least 59 ½
   2. You’re permanently disabled
   3. You’re the beneficiary of an account owner who has passed away
   4. You’re withdrawing up to $10,000 to buy your first home

If your withdrawal doesn’t meet the requirements listed above, it can’t be considered a qualified distribution. In that case, you’ll have to pay income taxes on the earnings you withdraw, as well as a 10% early withdrawal penalty.

Of course, the taxes and penalty only apply to the portion of your withdrawal that is earnings. Suppose you withdraw $12,000. Of that amount, $10,000 is your original contributions, while the other $2,000 is earnings. You will only pay income taxes and the 10% penalty on the $2,000 of earnings.

An important difference between Roth IRAs and other tax-advantaged retirement accounts is that you must meet both the five-year rule and one of the other requirements. Therefore, it’s possible to reach 59 ½ and still not be able to make qualified distributions from your Roth IRA if it hasn’t been at least five years since the start of the year of your first contribution.

Withdrawing Roth conversions

It’s possible to use a Roth IRA conversion to move money from a pre-tax account like a 401(k) plan or traditional IRA to a Roth IRA. It requires paying income taxes on the amount you contribute. Once you complete your Roth conversion, those dollars are treated differently than the other money in your Roth IRA.

Roth conversions are also subject to a five-year rule⁵, but it’s a bit different from the rule that applies to your Roth IRA earnings. Each Roth conversion has its own five-year clock that’s separate from your account’s five-year clock.

For example, suppose you convert $10,000 from your traditional IRA to your Roth IRA in 2024. You would be able to access that money penalty-free five years later in 2029. If you do another conversion in 2025, that one has its own five-year clock and won’t be accessible until 2030.

Ordering rules for distributions

In some cases, you may have a Roth IRA that includes your original contributions, your investment earnings, and some Roth IRA conversions. When you make a withdrawal, the IRS’s ordering rules⁶  will determine whether it’s taxable.

Here’s how your distributions will be ordered:

1. Regular contributions
2. Roth conversions and rollovers
3. Earnings on contributions

It’s possible that you’ll have enough regular contributions in your account that, if you take a withdrawal, it won’t be subject to any taxes or penalties. However, if your withdrawal amount exceeds your total contributions, you may also end up withdrawing conversion, rollovers, or earnings. And depending on the circumstances, you may end up paying taxes.

Specified exceptions for earnings withdrawals

The IRS allows a handful of exceptions that allow you to access your Roth IRA earnings early without taxes and/or penalties. As mentioned above,you can access your Roth IRA earnings tax-and-penalty-free once five years have passed if one of the following has occurred:

• You’ve turned 59 ½
• You’re permanently disabled
• You’re the beneficiary of an account owner who has passed away
• You’re withdrawing up to $10,000 to buy your first home

Additionally, in the following situations, you can access your Roth IRA earnings without being subject to the 10% early withdrawal penalty if one of the following is true:⁷

• You withdraw up to $5,000 to pay for qualified birth or adoption expenses
• You withdraw up to $22,000 to cover losses as a result of a federally declared disaster
• You’re the victim of domestic abuse and withdraw the lesser of $10,000 or 50% of your account
• You withdraw money to pay for higher education expenses
• You withdraw up to $1,000 to cover personal or family emergency expenses
• You take a series of substantially equal payments
• You’re subject to an IRS levy on your Roth IRA
• You pay for unreimbursed medical expenses of more than 7.5% of your annual gross income (AGI)
• You pay for health insurance premiums while you’re unemployed
• You’re a qualified military reservist called to active duty

Planning for Roth IRA withdrawals

It’s critical that you have a well-thought-out withdrawal strategy for your retirement dollars. The first part of this equation will be setting a goal for when you want to retire.

You can start withdrawing money from your retirement accounts penalty-free at age 59 ½. Many people retire later than that, but you may also wish to retire earlier. In that case, there are strategies available to help you access your money early.

Another consideration when planning your Roth IRA withdrawals is how they’ll fit in with other retirement accounts. A Roth IRA is an after-tax account and your withdrawals are tax-free during retirement. Meanwhile, other accounts, such as traditional IRAs and 401(k)s, are pre-tax accounts that require income taxes during retirement.

You may decide to withdraw from one type of account or the other at various points during your retirement. Many people also choose to withdraw from their pre-tax accounts first since Roth IRAs aren’t subject to required minimum distributions.⁸ You can allow that money to  remain invested as long as you want, and even pass it along to your beneficiaries tax-free.

Finally, a Roth IRA has some additional considerations because of its flexible withdrawals. Because you can access your Roth IRA contributions at any time, you could theoretically use that money for large expenses or even as an emergency fund. However, the more money you withdraw from the account early, the less money you’ll  have invested for retirement.

No matter when you’re considering a Roth IRA withdrawal, it’s important to consider the tax consequences, as well as how the decision fits into your other financial goals.

The bottom line

A Roth IRA is one of the most flexible types of retirement accounts because it allows you to access certain money early without paying taxes or penalties. Additionally, the tax benefit of this account makes it so that you can withdraw money during retirement without paying any taxes on it.

Whether you’re weighing the pros and cons of different retirement accounts or considering a withdrawal from an existing Roth IRA, consider consulting a financial professional who can help determine the best course of action for your money.