The Five-Year Rule for Roth IRAs and Inherited Accounts

Three separate five-year clocks govern when you can pull money from a Roth IRA or an inherited retirement account without owing taxes or a penalty. The five-year rule for Roth IRAs and inherited accounts is really three rules sharing a name: one controls when Roth IRA earnings become tax-free, another applies to each Roth conversion, and a third sets a liquidation deadline for certain inherited accounts. Each has its own start date, its own trigger, and its own penalty for getting it wrong.

The Five-Year Rule for Roth IRA Earnings

Contributions you make to a Roth IRA can be withdrawn tax-free and penalty-free at any time, for any reason. You already paid income tax on that money before it went in. Earnings are different. To take earnings out completely tax-free, your distribution must be “qualified,” which requires two conditions at the same time.

First, at least five tax years must have passed since you first contributed to any Roth IRA.¹ This is a single clock covering every Roth IRA you own. Opening a new account or making a new contribution does not restart it. Once you satisfy the five-year requirement for one Roth IRA, it’s satisfied for all of them.

Second, you must meet one of these qualifying triggers:¹

You’ve reached age 59½.
You meet the IRS definition of permanently disabled.
The distribution goes to a beneficiary or your estate after your death.
You use up to $10,000 (lifetime maximum) for a first-time home purchase.²

Pull earnings without meeting both conditions and you owe income tax on those earnings plus a 10% early distribution penalty. The penalty applies only to the earnings portion.³

How Roth IRA Withdrawals Are Ordered

When you take money out of a Roth IRA, you don’t pick which dollars come out. The IRS applies a fixed order:⁴

Regular contributions come out first. Always tax-free and penalty-free.
Conversions and rollovers come out next, first-in-first-out by year, with the taxable portion of each year’s conversions coming out before the nontaxable portion.
Earnings come out last.

This ordering is friendlier than most people assume. Because contributions come out first, you can often withdraw substantial amounts without reaching the earnings layer, so the five-year earnings rule never gets tested. If you own multiple Roth IRAs, the IRS treats them as one combined account for these ordering purposes.⁴

The Five-Year Rule for Roth Conversions

When you convert money from a traditional IRA to a Roth IRA, a separate five-year clock starts for that converted amount.¹ The rule exists to stop people from converting pre-tax funds, paying the income tax, and immediately pulling the money out to sidestep the early distribution penalty that would have applied on the traditional side.

Withdraw the taxable portion of a conversion within five years and the 10% penalty may apply, but only if you’re under 59½ when you take the distribution.⁵ The statute applies section 72(t)’s framework here, so 72(t)’s standard exceptions (age 59½, disability, death, the $10,000 first-time home purchase) can waive the penalty even inside the five-year window.

This is where bad advice circulates. You’ll sometimes hear that the 10% penalty on a conversion applies regardless of age if the five years haven’t passed. That’s wrong. If you’re already 59½ or older when you withdraw converted funds, the conversion five-year rule has no penalty consequence for you. The rule really matters for people who convert before 59½ and then want quick access to those dollars.

Each conversion runs its own independent five-year clock. A 2023 conversion and a 2026 conversion have separate timelines. Because the ordering rules require you to withdraw the earliest conversion first, tracking the year of each conversion matters for knowing which funds are past their five-year mark.¹

The Five-Year Rule for Inherited Accounts

When a retirement account owner dies, beneficiaries face distribution deadlines that depend on who they are and when the owner died. The five-year rule is one possible timeline, and since 2020 it applies to a narrower group than many people assume.

Under this rule, the beneficiary must empty the inherited account by December 31 of the fifth year after the year of the owner’s death.⁶ No annual withdrawals are required during those five years. You can take the money on any schedule you want, as long as the account is empty by the deadline.⁷

The five-year rule primarily applies to non-individual beneficiaries: estates, charities, and trusts that don’t qualify as “see-through” trusts.⁷ It also historically applied when the account owner died before their required beginning date for minimum distributions. If you’re an individual who inherited an IRA after 2019, you almost certainly fall under the 10-year rule instead.

The 10-Year Rule Most Individual Heirs Actually Face

For account owners who died in 2020 or later, most individual beneficiaries must empty the inherited account within 10 years of the owner’s death.⁷ This replaced the old “stretch IRA” approach, which had let beneficiaries spread distributions across their own life expectancy.

Whether you also owe annual distributions during the 10 years depends on when the original owner died relative to their required beginning date:⁴

If the owner died before their required beginning date, no annual distributions are required. Empty the account by the end of year 10.
If the owner died on or after their required beginning date, you must take annual distributions in years 1 through 9, with the balance out by the end of year 10.

That second scenario catches people off guard. If the original owner was already taking required minimum distributions, you can’t sit on the account for a decade. Missing an annual distribution during the window triggers the same excise tax as any other missed required distribution.

A smaller group of “eligible designated beneficiaries” can still stretch distributions over their own life expectancy: surviving spouses, minor children of the deceased owner (not grandchildren), disabled or chronically ill individuals, and individuals not more than 10 years younger than the deceased owner.⁷ When a minor child reaches the age of majority, they switch to the 10-year rule for the remaining balance.⁴

Inherited Roth IRAs Add the Owner’s Clock on Top

Inherited Roth IRAs follow the same liquidation timelines as inherited traditional IRAs, either the five-year or 10-year deadline depending on which category of beneficiary you fall into.⁷ They add one wrinkle: the original owner’s five-year contribution clock determines whether the earnings come out tax-free.

If the deceased owner’s Roth IRA had been open at least five tax years, all withdrawals by the beneficiary, including earnings, are tax-free.⁷ If the Roth was less than five years old at death, earnings are subject to income tax when distributed. Contributions and conversion amounts still come out tax-free under the ordering rules.

The beneficiary doesn’t start a new clock. They inherit the owner’s existing one. So someone who inherits a Roth opened two years before the owner’s death would need to wait until the original five-year mark to withdraw earnings tax-free, while still meeting the applicable liquidation deadline.

When Each Clock Starts

All three clocks use backdating rules that generally work in your favor, but they start on different dates.

For Roth IRA contributions, the five years begin on January 1 of the tax year for which you made your first-ever Roth contribution.¹ Make a contribution in March 2026 and designate it for tax year 2025, and your clock started January 1, 2025, even though the money didn’t land in the account until 2026. Because prior-year contributions can go in up to the April filing deadline, contributing early in the calendar year for the prior tax year effectively shaves nearly a year off the wait.

For Roth conversions, each conversion’s five-year clock starts on January 1 of the year the conversion was completed.¹ No prior-year backdating here. A conversion done in December 2025 and one done in January 2025 share the same January 1, 2025 start.

For inherited accounts, the five-year or 10-year clock starts on January 1 of the year after the owner’s death.⁶ Owner died in October 2024? The five-year window runs January 1, 2025 through December 31, 2029.

Penalties and Self-Correction

Pull earnings from your own Roth IRA before satisfying both the five-year requirement and a qualifying trigger, and you owe income tax on the earnings plus a 10% early distribution penalty.³ The same 10% penalty applies to the taxable portion of a conversion withdrawn within five years, unless one of the standard exceptions applies.¹

For missed required distributions from an inherited account, the penalty is an excise tax of 25% of the shortfall (the amount you should have withdrawn but didn’t). Before 2023 the rate was 50%. The SECURE 2.0 Act cut it to 25%, and if you catch the mistake and withdraw the missed amount within the correction window, generally within two years of the deadline, the tax drops to 10%.⁸ The shortfall and excise tax get reported on Form 5329.⁹

The reduced 10% rate is worth knowing about because many people who miss a deadline don’t realize they can self-correct. Taking the missed distribution and filing the paperwork inside the two-year window saves 15 percentage points, which is real money on a large inherited balance.

1
Office of the Law Revision Counsel. 26 USC 408A – Roth IRAs
2
Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts
3
Internal Revenue Service. Topic No. 557, Additional Tax on Early Distributions From Traditional and Roth IRAs
4
Internal Revenue Service. Publication 590-B, Distributions From Individual Retirement Arrangements (IRAs)
5
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
6
Office of the Law Revision Counsel. 26 USC 401 – Qualified Pension, Profit-Sharing, and Stock Bonus Plans
7
Internal Revenue Service. Retirement Topics – Beneficiary
8
Office of the Law Revision Counsel. 26 USC 4974 – Excise Tax on Certain Accumulations in Qualified Retirement Plans
9
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs