The five-year rule controls when Roth IRA earnings leave tax-free in retirement. A withdrawal is qualified and fully tax- and penalty-free only after five tax years plus age 59½, disability, death, or a qualified first-home purchase. A Roth IRA is an individual retirement account funded with after-tax dollars.
That two-part test decides whether earnings keep their tax break. The Internal Revenue Service states the test in Publication 590-B (2025). Contributions follow a simpler rule than earnings or conversions.
Table of Contents
- When is a withdrawal qualified?
- When does your five-year clock start?
- What comes out first?
- How do conversions change the timing?
- What if you tap earnings early?
When is a withdrawal qualified?
A qualified distribution needs both time and an event. The time test is five taxable years starting with your first Roth IRA contribution year.
The event test is reaching 59½, becoming disabled, death, or a qualified first-home purchase. Federal law sets this exclusion period in 26 USC 408A(d)(2)(B). It denies qualified status to payments made within five taxable years beginning with the first contribution year.
When does your five-year clock start?
The clock starts January 1 of the tax year of your first contribution to any Roth IRA. It does not start on the deposit date or restart with later accounts. The Internal Revenue Service explains this start date in Topic No.
451. An April 2026 contribution for tax year 2025 starts the clock January 1, 2025. That backdated start can shorten the wait by more than a year. Track the tax year of that first contribution, not the calendar date you sent payment.
What comes out first?
The Internal Revenue Service uses an ordering rule for nonqualified distributions. Regular contributions come out first, then conversion or rollover amounts oldest-first, and investment earnings come out last.
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Direct contributions can leave at any age without federal tax or the 10% early-distribution penalty. The Internal Revenue Service notes that treatment in Topic No. 557 because contributions used after-tax dollars.
- regular contributions first, tax- and penalty-free
- conversion and rollover amounts second, oldest year first
- investment earnings last, with the highest tax risk
How do conversions change the timing?
Each Roth conversion starts its own separate five-year penalty clock. The main five-year rule for qualified earnings is separate from these conversion clocks. One account can therefore hold several timing periods at once.
Withdrawing converted principal within five years before age 59½ generally triggers a 10% additional tax on the taxable converted amount. Wait past the conversion clock or past age 59½ to avoid that added charge. Keep conversion dates by year to know which dollars are clear.
What if you tap earnings early?
Earnings withdrawn before meeting both the five-year and qualifying-event tests are taxed as ordinary income. Taken before 59½ without an exception, they also face a 10% additional tax reported via Form 5329.
That result can surprise savers past retirement age. If you are over 59½ with a Roth younger than five years, withdraw only contributions or wait before touching earnings.
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