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Do Roth IRA Withdrawals Count as Income? What You Need to Know in 2025

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Are you worried about your retirement withdrawals being taxed? Confused about how Roth IRA distributions affect your income for tax purposes? You’re not alone! This is one of the most common questions I get from readers approaching retirement age

In short, it depends on whether you follow the rules. Don’t worry, though; I’ll explain everything in plain English.

The Big Picture: Roth IRA Withdrawals and Income

When it comes to Roth IRAs, there’s good news – they’re designed to provide tax-free income in retirement when used correctly. But the keyword here is “correctly.” There are specific rules that determine whether your withdrawals count as income or not.

Let us talk more about when Roth IRA withdrawals are income and when they are not for different reasons.

For General Tax Purposes

Roth IRAs work differently than traditional IRAs in one major way – you contribute after-tax dollars (meaning you’ve already paid taxes on that money). This fundamental difference affects how withdrawals are treated:

  • Contributions: You can withdraw your original contributions at ANY time without taxes or penalties. These don’t count as income.
  • Earnings: The investment gains in your account might be taxable depending on whether your withdrawal is “qualified” or “non-qualified.”

For Social Security Taxation Purposes

Many retirees worry about how their IRA withdrawals might affect their Social Security benefits. Here’s what you need to know:

  • Roth IRA withdrawals do NOT count toward your combined income for determining if your Social Security benefits are taxable.
  • Traditional IRA distributions DO count in the calculation and might make your Social Security benefits taxable.

This is a HUGE advantage of Roth IRAs that people often overlook!

What Makes a Withdrawal “Qualified” (Tax-Free)?

If you take money out of a Roth IRA and want it to be tax-free (not count as income), it must be “qualified.” ” This requires meeting two key conditions:

  1. The five-year rule: You must have opened and funded a Roth IRA at least 5 years ago.
  2. Age requirement: You must be at least 59½ years old.

If your withdrawal meets both criteria, congratulations! Your earnings will never count as income and will be completely tax-free.

Things get a little trickier if you don’t meet these requirements.

When Roth IRA Withdrawals DO Count as Income

If your withdrawal isn’t “qualified,” the earnings portion of your withdrawal will count as ordinary income for tax purposes. Additionally, you might face a 10% early withdrawal penalty.

For example, if you’re 45 years old and withdraw $20,000 from your Roth IRA that includes $15,000 in contributions and $5,000 in earnings, only that $5,000 in earnings would count as taxable income.

Exceptions to the 10% Penalty (But Still Taxable)

There are some situations where you can avoid the 10% penalty on early withdrawals of earnings, even though the earnings will still count as income. These include:

  • Using up to $10,000 for a first-time home purchase
  • Using the money for qualified higher education expenses
  • If you become totally and permanently disabled
  • Withdrawing up to $5,000 for a qualified birth or adoption
  • Taking distributions in substantially equal periodic payments

Roth IRA vs. Traditional IRA: Income Impact Comparison

Let’s compare how Roth and traditional IRA distributions affect your income:

Aspect Roth IRA Traditional IRA
Contributions After-tax (already taxed) Pre-tax (tax deduction when contributed)
Qualified withdrawals Tax-free, don’t count as income Always taxable as ordinary income
Effect on Social Security taxation None Can increase taxable portion of Social Security
Required Minimum Distributions None for original owner Required starting at age 73

Roth IRAs and Social Security: A Deeper Dive

Many retirees don’t realize that how they take retirement distributions can significantly impact their Social Security benefits. Let me break this down further:

The Social Security Earnings Test

If you’re taking Social Security before your full retirement age (67 for those born in 1960 or later), the Social Security Administration applies an “earnings test” that can reduce your benefits if your income exceeds certain thresholds.

The good news? IRA distributions, including both Roth and traditional, do NOT count as earned income for this test. Only money from working counts.

So if you’re worried about losing Social Security benefits due to IRA withdrawals – don’t be! Your benefits won’t be reduced because of IRA distributions.

The Social Security Taxation Test

However, there’s another consideration: whether your Social Security benefits themselves become taxable. This depends on your “combined income,” which includes:

  • Your Adjusted Gross Income (AGI)
  • Any non-taxable interest income
  • Half of your Social Security benefits

If this combined income exceeds certain thresholds, up to 85% of your Social Security benefits might be taxable.

Here’s where Roth IRAs shine: qualified Roth IRA withdrawals don’t increase your AGI and therefore don’t make your Social Security benefits more taxable. Traditional IRA withdrawals, however, do count toward this calculation.

Real-World Example: How Roth Withdrawals Can Save You Money

Let me give you a real example to illustrate this advantage:

Imagine two retirees, both receiving $30,000 annually from Social Security. They each need an additional $25,000 from their retirement accounts.

Retiree A withdraws $25,000 from a traditional IRA, which increases their AGI by $25,000.
Retiree B withdraws $25,000 from a Roth IRA, which doesn’t affect their AGI at all.

For Retiree A, this additional $25,000 in income might cause up to 85% of their Social Security benefits to become taxable, potentially adding thousands to their tax bill.

Retiree B, meanwhile, keeps their AGI lower, potentially avoiding Social Security taxation entirely.

This is why I often tell my clients that Roth IRAs can be GOLD for retirement planning!

Common Questions About Roth IRA Withdrawals and Income

Do I ever have to take money out of my Roth IRA?

Unlike traditional IRAs, Roth IRAs have no Required Minimum Distributions (RMDs) for the original account owner. You can keep your money growing tax-free for as long as you live if you want!

However, beneficiaries who inherit your Roth IRA will eventually need to take withdrawals according to IRS rules.

What if I withdraw from my Roth IRA before age 59½?

You can always withdraw your contributions tax-free and penalty-free at any age. The earnings portion, however, would typically be both taxable as income AND subject to a 10% penalty unless you qualify for one of the exceptions.

Will my Roth IRA withdrawals affect Medicare premiums?

Medicare premiums for Parts B and D can increase if your income exceeds certain thresholds (called IRMAA – Income-Related Monthly Adjustment Amount). Since qualified Roth withdrawals don’t count as income, they won’t push you into a higher premium bracket, unlike traditional IRA withdrawals.

Strategic Withdrawal Planning

Based on everything we’ve covered, here are some strategic considerations:

  1. Coordinate between different account types: If you have both Roth and traditional retirement accounts, plan which to tap when.

  2. Consider Roth conversions: Converting traditional IRA funds to Roth during lower-income years might make sense to reduce future required distributions.

  3. Watch income thresholds: Be aware of income thresholds that affect Social Security taxation, Medicare premiums, and other income-based benefits.

  4. Keep records: Maintain good records of your Roth IRA contributions so you can prove which portion of withdrawals represents contributions vs. earnings.

Conclusion: The Roth Advantage

So, do Roth IRA withdrawals count as income? For qualified withdrawals, the answer is a beautiful NO – they don’t count as income for tax purposes or Social Security benefit calculations. This makes Roth IRAs an incredibly powerful tool for retirement planning.

For non-qualified withdrawals, only the earnings portion counts as income, while your contributions remain tax-free regardless of when you withdraw them.

Have you been using Roth IRAs as part of your retirement strategy? Let us know in the comments below!


Note: Tax laws change frequently. This article is accurate as of June 2025, but always consult with a tax professional for the most current advice for your specific situation.

do roth ira withdrawals count as income

Roth IRA Withdrawal Rules

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