Must-Ask Questions: Roth IRA Withdrawals (2024)

FAQs

What are the rules for Roth IRA withdrawals? ›

Withdrawals must be taken after age 59½. Withdrawals must be taken after a five-year holding period. If you transfer your Traditional or Roth IRA at any age and request that the check be made payable to you, you have up to 60 days to deposit that check into another IRA without taxes or penalties.

After age 59 1/2, and if it's been five years or more since your first contribution to the Roth IRA, all withdrawals are tax-free. If you are under age 59 1/2, any withdrawal amounts that exceed your contributions are taxed at ordinary income rates, regardless of when you made your first contribution to the account.

Generally, early withdrawal from an Individual Retirement Account (IRA) prior to age 59½ is subject to being included in gross income plus a 10 percent additional tax penalty. There are exceptions to the 10 percent penalty, such as using IRA funds to pay your medical insurance premium after a job loss.

Unless it's a qualified distribution, withdrawing earnings before retirement age could incur a 10% penalty and income taxes. To withdraw earnings tax- and penalty-free, you must have held a Roth IRA for at least five years and be at least age 59½.

The Bottom Line. If you have a Roth IRA, you can withdraw your contributions at any time and they won't count as income. Also, the account's earnings can be tax free when you withdraw them as long as you are age 59½ or older and have had a Roth account for at least five years.

You can take distributions from your IRA (including your SEP-IRA or SIMPLE-IRA) at any time. There is no need to show a hardship to take a distribution. However, your distribution will be includible in your taxable income and it may be subject to a 10% additional tax if you're under age 59 1/2.

When you withdraw income from your Roth IRA, you must report it on Form 8606. This form helps you track your basis in regular Roth contributions and conversions.

You can generally withdraw your earnings without owing any taxes or penalties if you're at least 59½ years old and it's been at least five years since you first contributed to your Roth IRA. This is known as the five-year rule.

The Roth IRA five-year rule says you cannot withdraw earnings tax-free until it's been at least five years since you first contributed to a Roth IRA account. This five-year rule applies to everyone who contributes to a Roth IRA, whether they're 59 ½ or 105 years old.

It does not include withdrawals from Roth 401(k)s and/or Roth IRAs. The IRMAA surcharge is determined by your earnings for two years prior to signing up for Medicare. Your income at 63 years old will affect what you pay for Medicare when you turn 65.

How are Roth IRA distributions normally taxed? ›

Roth IRAs. A Roth IRA differs from a traditional IRA in several ways. Contributions to a Roth IRA aren't deductible (and you don't report the contributions on your tax return), but qualified distributions or distributions that are a return of contributions aren't subject to tax.

You can put funds back into a Roth IRA after you have withdrawn them, but only if you follow very specific rules. These rules include returning the funds within 60 days, which would be considered a rollover. Rollovers are only permitted once per year.

To break it down: Contribution limits for Roth IRAs are $7,000 in 2024. The Roth IRA five-year rule says you cannot withdraw earnings tax-free until it's been at least five years since you first contributed to a Roth IRA account.

Each conversion or rollover you make is subject to a separate five-year waiting period. If you don't wait the requisite five-year period from conversion to withdrawal, you may have to pay a 10% penalty, along with any income taxes owed.

Any earnings you withdraw are considered qualified distributions if you're 59½ or older, and the account is at least five years old, making them tax- and penalty-free. Other kinds of withdrawals are considered non-qualified and can result in both taxes and penalties.