A Roth IRA has tax-free growth as long as you've owned your account for 5 years and you're age 59½ or older when you withdraw your money.
If you make a withdraw prior to meeting the five-year rule and/or are withdrawing any investment earnings, you generally incur a 10% penalty on that growth you have withdrawn. This specifically applies to investment earnings. The contributions you’ve made can be withdrawn at any time because you’ve already paid taxes on this money.
What the Cares Act is doing is providing relief from any penalty, either due to the 5 year rule or age, for Covid related reasons.
So regardless, you will not pay tax on any withdraw from a Roth IRA, but the penalty is what you are possibly avoiding if you meet the Care Act guidelines for early withdraw.
Legislation restricts relief to qualified participants with a valid COVID-19 related reason for early access to retirement funds. These include:
- Being diagnosed with COVID-19
- Having a spouse or dependent diagnosed with COVID-19
- Experiencing a layoff, furlough, reduction in hours, or inability to work due to COVID-19 or lack of childcare because of COVID-19
- Have had a job offer rescinded or a job start date delayed due to COVID-19
- Experiencing adverse financial consequences due to an individual or the individual’s spouse’s finances being affected due to COVID-19
- Closing or reducing hours of a business owned or operated by an individual or their spouse due to COVID-19
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