Roth vs Traditional IRA withdrawal rules
When you can withdraw without tax, when you owe a 10% penalty, the two 5-year rules, required minimum distributions, and what happens when an IRA passes to heirs.
Side-by-side withdrawal table
| Scenario | Roth | Traditional |
|---|---|---|
| Withdraw contributions, any age | Tax-free, penalty-free, anytime | Not separable; all funds are pre-tax |
| Withdraw earnings before 59.5 | Taxable + 10% penalty (limited exceptions) | Taxable + 10% penalty (limited exceptions) |
| Withdraw earnings after 59.5 | Tax-free if account 5+ years old | Taxable as ordinary income |
| Required minimum distribution | None during owner's lifetime | Begins at age 73 (75 from 2033) |
| Inherited (non-spouse) | 10-year rule, no income tax | 10-year rule, ordinary income tax on every dollar |
| First-home purchase exception | $10,000 lifetime, tax-free if 5-year met | $10,000 lifetime, taxable but no penalty |
The two 5-year rules
Earnings clock
Your Roth must be open for 5 tax years before earnings can be withdrawn tax-free. The clock starts on January 1 of the year of your first contribution, even if you contributed in March of that year. Open one early to start the clock, even with $1.
Conversion clock (per conversion)
Each Roth conversion has its own 5-year clock for penalty-free withdrawal of the converted principal before age 59.5. Once you turn 59.5, this rule no longer applies regardless of when you converted.
Required minimum distributions
SECURE 2.0 raised the RMD age to 73 (74 in 2033, 75 from 2033 onward depending on birth year). RMDs are calculated by dividing your prior-year-end balance by your IRS Uniform Lifetime Table factor. Failure to withdraw triggers a 25% excise tax (10% if corrected promptly).
Roth IRAs have no RMDs during the owner's lifetime. This is a structural advantage: you can let the balance compound indefinitely and pass it to heirs.
Worked RMD example
| Age | 73 |
| Traditional IRA balance (year-end) | $500,000 |
| Uniform Lifetime factor | 26.5 |
| Required withdrawal | $18,868 |
Add this to ordinary income for the year. The same $500K in a Roth: $0 RMD.
Early withdrawal exceptions
Withdrawals from earnings before age 59.5 normally incur a 10% penalty plus income tax. These exceptions waive the penalty (income tax may still apply for Traditional, but not for Roth contributions or qualified earnings).
| Exception | Limit | Notes |
|---|---|---|
| First-home purchase | $10,000 lifetime | Buyer must not have owned a home in the prior 2 years |
| Higher education | Qualified expenses | Tuition, fees, books for self, spouse, children, grandchildren |
| Medical expenses | Above 7.5% of AGI | Unreimbursed medical bills exceeding the threshold |
| Health insurance (unemployed) | Premiums while unemployed | Receiving unemployment 12+ weeks |
| Disability | Total balance | Permanent and total disability per IRS definition |
| Substantially equal payments (72t) | Calculated by formula | Lock in for 5 years or until 59.5, whichever later |
| Birth or adoption | $5,000 per child | Per parent, applied within 12 months |
| Domestic abuse victim | $10,000 (SECURE 2.0) | Self-certify, withdraw within 1 year of abuse |
Inherited IRAs: the SECURE Act 10-year rule
For non-spouse beneficiaries (children, grandchildren, friends), both Roth and Traditional IRAs must be fully withdrawn within 10 years of the owner's death. The difference is what you owe along the way.
Withdraw within 10 years. No income tax on the distributions. Heirs can let the balance grow tax-free for the full 10 years and take it as a lump sum at the end.
Withdraw within 10 years. Every dollar is ordinary income tax to the heir at their bracket. A $500K inheritance in a peak-earning heir's hands could be taxed near 40% federally plus state.