When can individuals begin making tax-free withdrawals from a Roth IRA?

Individuals can begin making tax-free withdrawals from a Roth IRA after the account has been open for at least five years, in addition to reaching the age of 59 1/2. This five-year rule is crucial because it ensures that the account has been established long enough to benefit from tax-free growth.

Once both conditions are met—being over 59 1/2 and having the account open for five years—individuals can withdraw both their contributions and earnings without incurring any taxes. Withdrawals made before this timeframe may be subject to taxes and penalties, particularly on the earnings portion, not the contributions, which can always be withdrawn tax-free.

Understanding this rule is vital for planning retirement funding and navigating tax implications, making it essential knowledge for anyone dealing with IRAs.