A Roth IRA can be an incredible tool for retirement. Most do know that it can provide tax-free growth during those retirement years. What most people don’t know is that you have to wait 5 years before you can withdraw your earnings and enjoy tax-free growth. The clock officially starts on January 1st of the year you made your first contribution.
You can always withdraw you contributions however, even within the first 5 years. It is only the earnings that you will be taxed if withdrawn prematurely. Once you are 59 and 1/2 and the 5 years are up, you can enjoy that tax free growth to your hearts content.
This rule also applies to a Roth conversion. Meaning, if you convert a regular IRA into a Roth IRA, the 5 years clock starts the January of the conversion. For an inherited Roth however, the 5 year clock does not start over once the account is inherited.
For more info about Roth IRA’s and how they differ from normal IRA’s, check out this article.