The Roth IRA 5-Year Rule, Explained Simply

A Roth IRA comes with a timing rule that often surprises people: before your earnings can be withdrawn tax-free, the account must be open for at least five tax years — and meet other qualifying conditions like reaching age 59½, disability, or first-time home purchase use.

The clock starts ticking on the first day of the tax year you make your first Roth contribution, and ends on the last day of the fifth consecutive year.

Contributions are always the flexible part — you can withdraw them at any time tax- and penalty-free. Earnings follow one 5-year clock within the Roth IRA. Roth conversions each have their own 5-year penalty clock. Keeping clear records as well as understanding the withdrawal order for distributions is important.

Why it matters:

The 5-year rule determines when your Roth IRA’s growth becomes fully tax-free. Understanding that timeline helps prevent early-withdrawal taxes or penalties later on.

If you are unsure how the rule applies to your situation, check with a financial advisor and a tax professional before taking distributions.

Each week, I share a clear, bite-sized tax insight straight from my continuing education so you can stay informed without sifting through tax changes.

Next week, we discuss the difference between distribution requirements in a Roth and a Traditional IRA.

Thanks for reading,

Brandy Sparkman, EA

I’ll keep learning so you can stay focused on what you do best.

See you next week for another Tax Minute.