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Can Roth IRA contributions be withdrawn without tax and/or penalty?

Last Updated December 17, 2015

Question: 

Can Roth IRA contributions be withdrawn without tax and/or penalty?

Answer: 

It depends.

From a technical perspective, contributions include regular contributions, and Roth conversion contributions. For the purpose of this website, we use the term contribution to refer to regular contributions.

Regular contributions can be withdrawn at anytime, and will be tax and penalty free. For instance, if you made a Roth IRA contribution yesterday, and withdraw the amount today, it will be tax and penalty free. This is because no tax deduction was (or could be) permitted/allowed for the contribution. In sum, a contribution with funds that have already been taxed will be tax and penalty-free when withdrawn.

Roth conversion amounts can be withdrawn at anytime, and will be tax-free, because any taxes owed on the amount is assessed when the conversion occurs. However, the amount will be subject to the early distribution penalty, unless either of the following applies:

  • The conversion has aged for at least five years
  • The distribution occurs when the Roth IRA owner is at least age 59 ½, or
  • An exception to the penalty applies ( exceptions listed here )

 

Important notes:

Note # 1

Distributions from Roth IRAs are considered to occur from ‘source of funding’, in a specific order. This is referred to as the ordering rules. Under these ordering rules, distributions occur from the following sources, in the order listed:

  • Regular contributions: These can be withdrawn at anytime, and will be tax and penalty free

  • Roth Conversions: These will be tax-free when withdrawn, but will be subject to the early distribution penalty, unless the owner is at least age 59 ½ when the distribution occurs, the conversion has aged five years, or another exception applies

  • Earnings: These will be subject to tax, unless the distribution is qualified, and will be subject to the early distribution penalty-unless the distribution occurs when the owner is at least age 59 ½ or an exception applies.

Distributions occur from one category (bucket), only after amounts in the previous bucket- as listed in the ordering rules- have been exhausted. For instance, distributions can never occur from conversion amounts, until all contribution amounts have been withdrawn.

Note # 2

 

There are two five year-periods for Roth IRA distributions.

Question answered by by Denise Appleby