Definition
The rule that earnings in a Roth IRA can only be withdrawn tax-free once five tax years have passed since your first Roth IRA contribution, in addition to being at least 59½ or meeting another qualifying reason. A separate five-year clock applies to each Roth conversion for penalty purposes for people under 59½. Contributions themselves can come out at any time without tax or penalty.
Why it matters
Starting the clock early, even with a tiny contribution, means the account is fully qualified by the time you need it. Retirees who open their first Roth at 58 or convert large sums late need to plan around the waiting period to avoid tax or penalty on earnings.
Example
Someone opens a Roth IRA at 57 with $5,000, and by 60 it has grown to $6,500. They can withdraw the $5,000 of contributions at any time, but the $1,500 of earnings is not tax-free until the five-year period ends at 62, even though they are already past 59½.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.