Whether you can pull money out of your IRA without a penalty depends on your account type, your age, and how long the account has been open. The rules for a Roth and a Traditional IRA diverge enough that getting them confused can cost you real money.
Part of our guide: Retirement Planning.
Withdrawing before age 59½
With a Roth IRA, you can withdraw your own contributions at any age, tax- and penalty-free, because you already paid tax on that money before it went in. The catch is earnings: withdraw more than you’ve contributed before age 59½, and you’re pulling from earnings, which can trigger both taxes and a 10% penalty unless you meet a specific exception. If you contributed $7,000 and the account grew to $14,000, you can take out that original $7,000 anytime without touching the penalty-exposed portion.
A Traditional IRA is less forgiving. Withdraw before 59½ and you’ll generally owe both income tax and a 10% federal penalty, though the IRS carves out exceptions for situations like certain medical expenses, a first home purchase, or qualified education costs. Full details are on the IRS’s early withdrawal page.
Withdrawing between 59½ and required distribution age
Once you hit 59½, the penalty disappears for both account types. With a Roth, if the account has also been open at least five years, both contributions and earnings come out tax-free. With a Traditional IRA, you avoid the penalty but still owe ordinary income tax, since the money went in pre-tax to begin with.
Required minimum distributions
Traditional IRAs come with required minimum distributions, or RMDs, starting at a specific age depending on your birth year: age 72 if you were born between July 1, 1949 and December 31, 1950, with the starting age rising to 73 or 75 for people born later. Your first RMD is due by April 1 of the year following the year you hit the required age, and annually by December 31 after that. Roth IRAs have no RMD requirement during the original owner’s lifetime, which means the money can keep growing tax-free for as long as you choose to leave it there.
Inherited IRAs
The rules shift again for inherited accounts. Non-spouse beneficiaries are generally required to withdraw the full balance within 10 years if the original owner died in 2020 or later. Spousal beneficiaries have more flexibility: they can treat the IRA as their own or take distributions based on their own life expectancy. Withdrawals from an inherited Roth are tax-free if the original account was open at least five years; withdrawals from an inherited Traditional IRA are taxed as income to the beneficiary. More detail is available directly from the IRS’s IRA distribution FAQ.
Where digital assets fit in
Self-directed IRAs extend these same rules to alternative holdings, including digital assets, alongside traditional stocks and bonds. If you’re weighing whether to diversify a retirement account into crypto, the withdrawal and RMD rules above still apply in full, the account type determines the tax treatment, not what the account holds. Talk to a tax advisor before making withdrawal decisions, since getting the timing wrong on a Traditional IRA can push you into a higher bracket than you expected.
Educational only, not tax, legal, or investment advice. Check primary sources and speak with a qualified professional before making financial decisions.
