Must-Ask Questions: Roth IRA Withdrawals (2024)

Here are six must-ask questions to help you consider how Roth IRA withdrawals might work for you.

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Yes, you may be able to withdraw earnings from your Roth IRA before age 59 ½, if you qualify for an IRS-approved exception. But your exact options will depend on whether you’ve held the account for at least five years.¹

If you've held your Roth IRA for at least five years, you may qualify for an early withdrawal without taxes or penalty for these reasons:

• You use it for a first-time home purchase (up to a $10,000 lifetime maximum)
• You become disabled
• You pass away (and the withdrawal is for your beneficiary)

If you've held your Roth IRA for less than five years, you may qualify for an early withdrawal without penalty for the reasons below. But you'll still owe ordinary income tax on any earnings you take out before age 59 ½.

• You use it for qualified expenses related to a birth or adoption
• You use it to pay for unreimbursed medical expenses or health insurance
• You use it for qualified education expenses
• The distribution is made in substantially equal periodic payments²

Yes. If you convert a traditional IRA or 401(k) to a Roth IRA , you’ll need to hold the Roth IRA for at least five years before making withdrawals to avoid the 10% early withdrawal penalty and be age 59 ½ or older. The five-year period starts on the first day of the tax year in which you made the conversion.

“There are exceptions, but a converted Roth IRA is generally treated as a new account that must be open for at least five years to meet the timing requirement of the tax code,” said Hayden.

Aside from age requirements and the five-year rule, experts often recommend delaying withdrawals from your Roth IRA as long as possible to give your contributions and earnings more time for potential growth.

"Any tax-free gains you make on investments in your Roth IRA can help offset the taxes you paid up front," said Hayden. "And the longer you can leave your Roth IRA assets alone, the longer they have to potentially benefit from compound growth."

Required minimum distributions (RMDs) are withdrawals the IRS requires you to take from many retirement accounts once you reach age 73. Unlike traditional IRAs or other tax-deferred accounts, such as a 401(k), you're not required to take RMDs from a Roth IRA, which means you can leave your Roth savings invested as long as you choose.

Hayden said, "Having a portion of your savings in a tax-advantaged retirement account that isn't subject to RMDs can provide critical flexibility that may help you withdraw your retirement savings in a more tax-efficient way over time. And if you don't use your Roth IRA funds for retirement, you can pass them along to your heirs so they can benefit from tax-free withdrawals."

¹Generally, the IRS treats a Roth IRA withdrawal made more than five years after the first tax year in which you made a contribution (including earnings) as a "qualified distribution." This means it is not taxable or subject to a penalty as long as you satisfy one of these qualifying conditions: You’re at least 59½, you become disabled or pass away, or you use the withdrawal (up to a $10,000 lifetime maximum) to pay for a first-time home purchase.

²Schwab does not currently perform these substantially equal periodic payment (72(t)) calculations. You should speak with a tax advisor. Find more information on these calculation methods in IRS Revenue Ruling 2002-62.