Compare different retirement accounts and learn their tax benefits and rules with our Roth IRA vs. Traditional IRA infographic.
Roth IRA FAQs
Unlike 401(k)s and Traditional IRAs, Roth IRAs don't require you to take minimum distributions starting at age 70½. And similar to a Traditional IRA, you can avoid the early withdrawal penalty for situations such as:
- Higher education expenses
- First-time home purchases
- Medical expenses
- Disability claims
- Health insurance
- Substantially equal periodic payments
- Involuntary distribution due to an IRS tax levy
- Reservist distributions
Converted funds. Each conversion amount is subject to a five-year holding period, which begins on January 1 of the year in which you made the conversion. If you do a series of conversions over several years, you'll have separate holding periods for each.
If you withdraw funds before the end of the five-year period, you could be subject to a 10% early withdrawal penalty (you may be exempt if you turn 59½ before taking the withdrawal, even if you haven't held the account for the full five years). Once you've satisfied the holding period, you can make withdrawals of converted funds without penalty, even if you're under age 59½.
Earnings. The five-year rule for earnings also begins on January 1 of the year in which you open and contribute (or convert) to your first Roth IRA. However, it doesn't reset each time you make a contribution or open another Roth account.
Withdrawals of any earnings from your Roth IRA investments are tax- and penalty-free if you've satisfied the five-year holding period and you're over age 59½. If you've met the five-year holding period but you're not yet 59½ years old, you'll be subject to a 10% early withdrawal penalty.
Unlike conversions and earnings, contributions to a Roth IRA are not subject to any holding period, so in most cases you can withdraw them without paying taxes or penalties at any time.
This tax information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends that you consult with a qualified tax advisor, CPA, financial planner, or investment manager.