Roth IRA: Contributions, Withdrawals, and the Five-Year Rule

Roth IRA contributions are not deductible. A return of regular contributions is not included in income, while earnings receive tax-free treatment only when a distribution is qualified. This is different from a traditional IRA, where deductible contributions and tax-deferred earnings are generally taxed when distributed.

The Roth label describes tax treatment, not the investment. Cash, funds, bonds, and other permitted investments inside the account still carry their own risks, costs, and expected behavior.

For 2026, the combined contribution limit across a person’s traditional and Roth IRAs is $7,500. The IRA catch-up limit for an eligible person age 50 or older is $1,100. Contributions also cannot exceed the applicable compensation amount.

Direct Roth IRA contribution eligibility phases out with modified adjusted gross income. For 2026, the IRS lists phase-out ranges of $153,000–$168,000 for single filers and heads of household, $242,000–$252,000 for married couples filing jointly, and $0–$10,000 for married people filing separately. Filing status and detailed tax circumstances matter, so verify eligibility before contributing.

For a common qualified distribution of earnings, the distribution must occur after the five-taxable-year period that begins with the first tax year for which a contribution was made to any Roth IRA, and it must meet a qualifying event such as reaching age 59½. Death, disability, and certain first-home distributions have separate rules.

Roth conversions have additional timing considerations, and a designated Roth account inside a workplace plan is not identical to a Roth IRA. Do not use the phrase “five-year rule” without identifying which transaction and account type it refers to.

Compare the value of paying tax now with the possibility of qualified tax-free withdrawals later. Current and future tax rates are uncertain, so the choice is not reducible to a universal rule that Roth is always better.

Also review investment costs, beneficiary choices, access needs, and whether a workplace plan offers a match. A Roth IRA can complement rather than replace an employer plan.