Retirement tax questions

When you withdraw (and keep) money from a Roth IRA, you are always deemed to withdraw contributions first, conversions second, and earnings last.  For example, suppose your contributions over the years are $50,000, and the value is $75,000.  If you withdraw $40,000, it is all contributions, and your remaining balance is $10,000 of contributions and $25,000 of earnings.    If you withdrew $60,000, then your withdrawal is $50,000 contributions and $10,000 earnings, and your remaining balance is all earnings.  This is important for future withdrawals.  then, the tax consequences are:

 

  Under age 59-1/2 Over age 59-1/2
Withdrawal of contributions Never taxable Never taxable
Withdrawal of conversions*, if the conversion was less than 5 years previous No income tax, but subject to a 10% penalty for early withdrawal Not taxable
Withdrawal of conversions, if the conversion was more than 5 years previous Not taxable Not taxable
Withdrawal of earnings, if it is less than 5 years since you opened your first Roth IRA** Subject to income tax plus a 10% penalty for early withdrawal Subject to income tax, but no additional penalty for early withdrawal
Withdrawal of earnings, if it is more than 5 years since you opened your first Roth IRA Subject to income tax plus a 10% penalty for early withdrawal  Not taxable

 

*Each conversion has a separate 5 year clock

**A Roth account inside a 401k or 403b does not start the 5 year clock for Roth IRAs.  IRAs are controlled by different laws than workplace plans.