A Roth individual retirement account (IRA) is a savings vehicle that helps you save after-tax money. Though your contributions to the account don't net you a tax deduction the year you make them, you can withdraw from a Roth IRA tax-free if you satisfy IRS requirements.

The whole point of saving money, of course, is to use those funds later. So when can you withdraw from a Roth IRA, and how can you manage your taxes when you do it? The taxes you pay for a Roth IRA withdrawal depend on three main factors:

1. The money you're withdrawing.
2. How long you've had your Roth IRA.
3. Your age.

You can withdraw contributions you've made to your Roth IRA at any time with no taxes or penalties. But if those contributions have earned any interest, things get more complicated.

The Five-Year Rule

Once you've opened a Roth IRA, you'll need to wait at least five years before you can withdraw any earnings tax-free. If you withdraw earnings before then, you'll have to pay taxes, and the tax you pay depends on your age:

• If you're under 59 1/2, you'll pay income tax plus a 10% penalty on the earnings.
• If you're over 59 1/2, you'll pay income tax, but you won't pay any penalty.

There's also a separate five-year rule for Roth IRA conversions. What is an IRA conversion? It's when you shift pretax money to a Roth IRA and pay taxes today instead of down the line. Taking converted funds out of your Roth IRA within five years of converting them can also lead to penalties. Even though you pay income tax at conversion, the IRS doesn't want you to take distributions shortly after converting. There's a separate five-year rule for each Roth conversion, so a series of partial Roth IRA conversions requires careful recordkeeping.

The Importance of Being 59 1/2

Your age is always important with IRAs. After you turn 59 1/2, you can withdraw earnings from your Roth IRA tax-free, assuming you meet the five-year requirement.

As with everything tax-related, there are exceptions, pitfalls and potential workarounds, so review your strategy with a certified public accountant before deciding on anything.

Maximizing the Benefits of a Roth IRA

OK, those are the rules. Now, how can you maximize the benefits of a Roth IRA? Here are three strategies to remember.

1. Manage tax rates. A Roth IRA works best when you can pay taxes at the lowest rate possible. If your income is relatively low, it could make sense to contribute to a Roth IRA or convert pretax money to a Roth IRA. It's a reasonable assumption that you'll face higher income tax rates during your retirement years, which could happen if your income rises or if lawmakers raise tax rates.
2. Plan for retirement. There's no way to predict the future, but prepaying your taxes could help you avoid a lot of costs, including tax costs, in retirement. Roth IRA withdrawals shouldn't make your Social Security income taxable, for example, and tax-free withdrawals could help you keep your Medicare premiums low.
3. Start the clock. Because the five-year rules affect Roth IRA withdrawals, it's important to remember when you contributed to your accounts or converted funds to a Roth IRA. Start the clock by making your first Roth IRA contribution as soon as possible. If you think you'll need to convert funds within the next five years, consider converting sooner than later — assuming the strategy makes sense.

So when can you withdraw from a Roth IRA and get the best tax treatment? Ideally, you'll take distributions after you turn 59 1/2 and after you've satisfied any five-year holding requirements in your account. When you can meet IRS requirements for tax-free income, your Roth IRA becomes a valuable tool for retirement planning.