What Is a Roth IRA?
For a quick refresher, a Roth IRA is a retirement account funded with after-tax dollars. You don’t get a tax deduction for contributing, but in exchange, your money grows tax-free and qualified withdrawals in retirement come out tax-free too. Having those tax-free dollars invested over several years can be one of the most powerful tools when planning for retirement.
For 2026, you can contribute up to $7,500 to a Roth IRA, or $8,600 if you’re 50 or older. Roth eligibility phases out based on your modified adjusted gross income ($153,000 to $168,000 for single filers, $242,000 to $252,000 for married couples filing jointly), though high earners can often still get money into a Roth through a conversion (more on that below). Unlike a traditional IRA, a Roth has no required minimum distributions during the original owner’s lifetime, which makes it a useful tool for both retirement income and estate planning.
What Is the 5-Year Rule?
The 5-year rule is actually shorthand for three separate rules. Each one applies to a different situation and has its own timeline.
- The 5-Year Rule for Regular Contributions
This rule applies to everyone with a Roth IRA. To withdraw earnings tax-free, two things have to be true:
- You’re at least 59½ (or meet another qualifying exception, like death, disability, or a first-time home purchase up to $10,000).
- At least five years have passed since your first Roth contribution.
Five years is measured from January 1 of the tax year of your first contribution to any Roth IRA. So if you open your first Roth IRA in 2026 and contribute for the 2025 tax year, the clock actually starts January 1, 2025, and the five years are satisfied on January 1, 2030.
Another important consideration is that this rule only affects earnings. Your original contributions can always be withdrawn tax-free and penalty-free at any time since you already paid tax on that money.
The IRS also assumes a specific withdrawal order from a Roth IRA: contributions come out first, then converted amounts, then earnings last. That ordering works in your favor, since it means you’d have to drain contributions and conversions before you’d ever touch earnings.
- The 5-Year Rule for Roth Conversions
Conversions follow a different five-year rule than regular contributions. When you convert money from a traditional IRA into a Roth IRA, that conversion starts its own separate five-year clock. This rule exists specifically to prevent people from using conversions as a way around the 10% early withdrawal penalty.
Unlike the contribution rule above, this clock resets with every conversion. Convert money in 2024 and again in 2026, and you now have two different five-year clocks running, each ending on a different date. As with contributions, the clock is based on the calendar year: a conversion made anytime in 2026 is treated as if it happened on January 1, 2026.
The good news is that if you’re already 59½ or older when you make the conversion, the conversion clock no longer matters for penalty purposes. The 10% penalty only exists for people withdrawing converted funds before age 59½, so once you clear that age threshold, that particular five-year clock becomes irrelevant.
- The 5-Year Rule for Inherited Roth IRAs
If you inherit a Roth IRA, you don’t get your own fresh five-year clock. Instead, you inherit the original owner’s clock. If the Roth IRA owner first contributed more than five years before their death, the account is already “aged” and earnings can come out tax-free. If not, you’ll need to wait until five years have passed since the original owner’s first contribution before earnings are tax-free.
The 10% early withdrawal penalty never applies to inherited IRAs, regardless of the beneficiary’s age. But the 5-year rule still determines whether earnings are taxable, so it’s worth checking when the original account was first funded.
Separately, most non-spouse beneficiaries who inherit a Roth IRA from someone who died in 2020 or later must empty the account within 10 years under the SECURE Act. That’s a different rule from the 5-year rule, but the two often get lumped together, so it’s worth keeping them straight.
A Few Other Things Worth Knowing
Employer plans like a Roth 401(k) or Roth 403(b) have their own five-year clock too, and it’s tracked separately from your Roth IRA. Rolling a Roth 401(k) into a Roth IRA can actually let you inherit the IRA’s clock if it’s older, which is a detail worth discussing with your advisor before you roll funds over.
It’s also worth remembering that none of this affects your ability to access original contributions. The 5-year rules are about earnings (and, for conversions, about avoiding a penalty on the converted principal before 59½). The real key is knowing which bucket your withdrawal is coming from since that’s what determines the tax and penalty risk.
If you have questions about how the 5-year rule applies to your own Roth IRA, do not hesitate to reach out to your P&A Advisor or connect with us.
Frequently Asked Questions
Does the 5-year clock restart if I open a new Roth IRA?
No. The clock for regular contributions starts with your first Roth IRA contribution ever and applies to all Roth IRAs you own after that. It’s a one-time requirement, not one per account.
Can I withdraw my contributions before the 5 years are up?
Yes. Contributions can be withdrawn tax-free and penalty-free at any time, since you already paid tax on that money. The 5-year rule only applies to earnings.
Does the 5-year rule apply if I’m already over 59½?
The regular contribution 5-year rule still technically applies for earnings to be tax-free, though most people who’ve had a Roth open a while have already satisfied it. The conversion 5-year rule, which exists to prevent penalty avoidance, doesn’t apply at all once you’re 59½.
If I inherit a Roth IRA, do I need to wait 5 years to withdraw it?
It depends on when the original owner first funded the account. If their first Roth contribution was more than five years before their death, the account is already aged and earnings come out tax-free. If not, earnings are taxable until that five-year mark passes, though contributions and converted amounts can still be withdrawn anytime.
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