Roth IRA Withdrawal Ordering Rules

The IRS imposes a strict Roth IRA withdrawal ordering rule: you must withdraw contributions first, then conversions (by year), then earnings last. Understanding this sequence is essential because it determines whether a withdrawal is tax-free, taxable, or subject to penalties.

Why the ordering exists

The Roth IRA withdrawal ordering rule reflects the account’s legislative design: contributions (post-tax deposits) come out tax-free, conversions face a middle layer of taxation, and earnings are the last resort. The rule prevents abuse—imagine being able to drain earnings tax-free while leaving contributions behind. Instead, the IRS treats each Roth account as a single pool where funds flow out in a mandated sequence.

This ordering is not optional or flexible. Whether you request a withdrawal, take a distribution via an inherited account, or trigger a conversion, this sequence applies automatically.

The three withdrawal layers

Contributions (first out, always tax-free)

Your regular annual contributions—amounts you deposited from earned income, up to the annual limit—exit first. These come out tax-free and penalty-free, regardless of your age or how long the account has been open. If you contributed $7,000 in 2024 and $7,000 in 2025, those $14,000 cumulative contributions form the first layer.

Calculating your total contributions over time requires reviewing IRA Forms 5498 or old account statements. The IRS does not automatically track this for you; you must know the number.

Conversions (second out, ordered by year)

Once contributions are exhausted, the next layer is conversions—money you moved from a traditional IRA or other pretax source into the Roth. Conversions come out in the order they were made (FIFO: first-in, first-out, by tax year). A 2024 conversion is withdrawn before a 2025 conversion.

The tax treatment of a conversion withdrawal depends on what the original conversion consisted of. If you converted pretax IRA dollars, that conversion was partly or wholly taxable in the year you did it. When you withdraw that same converted amount later, it is not taxed again—the tax was already paid at conversion time. However, if you converted nondeductible IRA contributions (basis), that portion of the conversion is not taxable a second time.

The pro-rata rule complicates conversion withdrawals if you also hold other pretax IRAs. Mixing account types triggers an aggregation test that can increase the taxable portion of the conversion.

Earnings (last out, subject to penalty if early)

The final layer is earnings—all gains, dividends, and interest the account generated. Earnings come out last and are always taxable as ordinary income if withdrawn. If you are younger than 59½, the withdrawal is also subject to a 10% early-distribution penalty unless you meet a narrow exception (disability, medical expenses, first-home purchase up to $10,000 lifetime, etc.).

The ordering constraint and nondeductible conversions

A point of frequent confusion: the withdrawal ordering rule applies to the account as a whole, not to individual conversions. You cannot specify “withdraw only from my 2024 conversion.” Instead, if you withdraw $5,000 from a Roth account that holds $10,000 in contributions, $20,000 in conversions, and $5,000 in earnings, the ordering rule mandates that the first $5,000 out comes from contributions.

This constraint interacts awkwardly with the pro-rata rule for IRAs. If you have both a pretax IRA and a Roth IRA, you cannot use the Roth withdrawal to “escape” the pro-rata calculation on a nondeductible IRA withdrawal or conversion. The IRS aggregates all your traditional, SEP, and SIMPLE IRAs for the pro-rata test—and separately applies the Roth withdrawal ordering to your Roth accounts.

Ten-year distribution rules and ordering

Beneficiaries of a Roth IRA who are not spouses face a ten-year distribution rule (under the SECURE Act 2.0, as of 2024). The rule requires the account to be emptied by the end of the tenth year following the account owner’s death. During those ten years, the ordering rule still applies: distributions pull from contributions first, conversions second, earnings last. Non-spouse beneficiaries cannot access earnings tax-free, even during the ten-year window, unless the Roth had been open for at least five tax years.

Common withdrawal scenarios

Scenario 1: Withdrawal before age 59½ from a Roth opened at age 40. An account has $30,000 contributions, $10,000 conversions (all 2023), and $8,000 earnings. You withdraw $25,000 at age 55. The ordering rule gives you the first $25,000 from contributions. Result: $25,000 is tax-free and penalty-free.

Scenario 2: Partial withdrawal of earnings. Same account, same age, but you withdraw $50,000. The first $30,000 is contributions (tax-free, penalty-free). The next $10,000 is conversions from 2023 (no tax—already paid at conversion). The final $10,000 is earnings. The earnings $10,000 are taxable and subject to the 10% penalty (total tax and penalty owed: $1,000 minimum, plus ordinary income tax). The withdrawal is not “split”—it all comes out; you just know which layer each dollar came from for tax purposes.

Scenario 3: Roth conversion and pro-rata interaction. You own a pretax IRA with $50,000 and a Roth IRA with $20,000 contributions and no earnings. You want to convert $10,000 from the pretax IRA. The pro-rata rule applies: the test divides pretax and nondeductible IRA balances. After conversion, if you then withdraw $5,000 from the Roth, the Roth withdrawal ordering rule states that $5,000 comes from contributions first—this is separate from the pro-rata calculation.

Strategic implications

Since contributions and conversions exit before earnings, one strategy is to maximize regular contributions first, then convert pretax balances, with the knowledge that you can access both layers relatively freely before age 59½ (though conversions have a five-year rule per conversion year). Earnings, by contrast, are locked until age 59½ unless you qualify for an exception.

Withdrawals for first-time homebuyers (up to $10,000 lifetime) or disability also affect ordering: the exception is applied to earnings first, not contributions.

See also