order in which roth ira withdrawals are taxed before age 59 1/2
I want to withdraw Traditional IRA funds this month for potential use in 2025. I am am not 59 1/2 yet. I am debating doing a Roth rollover vs paying the 10% penalty now.
I have rolled funds over in 2021, 2022 and 2023.
If I do a rolllover this month and decide to withdraw those same funds in 2025 (paying the penalty), do my rollovers in 2021-2023 still have the 5 year clock ticking? Or do the earliest rollover funds come out first?
Answers
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The Roth IRA withdrawal ordering rules determine the order in which money is withdrawn from a Roth IRA account and the tax consequences:
The order of distribution is:
- IRA participant contributions
- Taxable conversions
- Non-taxable conversions
- Earnings
If you are withdrawing Roth IRA contributions prior to turning 59 1/2, you will be subject to the 10% early distribution tax for any earnings that are withdrawn. The earliest Roth contributions or rollover funds will come out first (first in, first out).
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