Several states do not tax Roth IRA distributions, primarily those with no state income tax, which include Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (as of 2025/2026). Additionally, states like Illinois, Iowa, Mississippi, and Pennsylvania generally exempt most or all retirement income, including IRA distributions, from state taxes.
In general, qualified distributions from a Roth IRA are exempt from both state and federal income taxes and no withholding would be required, with the exception of MI and MS.
Roth IRA tax-free withdrawals on earnings require both reaching age 59½ and having the account open for at least five years (the 5-year rule); however, you can always withdraw your original contributions tax-free and penalty-free at any time, as they were made with after-tax dollars, with exceptions for earnings allowing tax-free/penalty-free withdrawal before 59½ for things like first-time home purchases or disability.
These 13 States Won't Tax 401(k)s in 2026
1, 2025), South Dakota, Tennessee, Texas, Washington and Wyoming. Because these states lack a personal income tax, traditional 401(k) distributions, IRAs, pensions, and most other retirement income (including Social Security income) are not taxed at the state level.
You'll never pay taxes on withdrawals of your Roth IRA contributions. And you won't pay taxes on withdrawals of your earnings as long as you take them after you've reached age 59½ and you've met the 5-year-holding-period requirement.
Roth IRA: Withdrawals of earnings are taxable if the account hasn't been open for at least 5 years or if you're under 59½, with certain exceptions. Those under 59½ may also be subject to a 10% penalty. Inherited traditional IRA: Generally, beneficiaries will pay taxes on their withdrawals.
Unlike traditional IRAs, Roth IRAs are not subject to the lifetime required minimum distribution rules. However, if you do decide to withdraw funds, a qualified distribution will be completely tax-free and not included in adjusted gross income.
The 4% rule is a retirement guideline: withdraw 4% of your savings in the first year, then adjust that dollar amount for inflation annually, aiming to make your money last 30 years, but it doesn't account for taxes (Roth IRA withdrawals are tax-free, unlike Traditional IRAs) or varying market conditions, so it's a starting point, not a rigid rule, especially for early or very long retirements.
The one-word secret to lowering your IRA RMD tax hit is Charity, specifically by making a Qualified Charitable Distribution (QCD) directly from your IRA to a charity, which satisfies your RMD, reduces your taxable income, and avoids income tax on that amount, unlike a normal withdrawal.
"A Roth IRA or Roth 401(k) can help you save on taxes in retirement. Not only are withdrawals potentially tax-free,2 they won't impact the taxation of your Social Security benefit. This is an important aspect of a Roth account that most people are not aware of.”
To avoid the 22% tax bracket (or any higher bracket), focus on reducing your taxable income through strategies like maxing out 401(k)s and HSAs, deferring bonuses, tax-loss harvesting, smart charitable giving, and strategic asset location, understanding that higher rates only apply to income within that bracket, not your entire income.
The best U.S. states for retirement
The top two states to retire in according to our formula are — drumroll please — Wyoming and Florida. Wyoming takes the top spot in having a competitive approach to state taxes.
States that offer property tax exemptions to seniors
Alabama: Exempts seniors from the state portion of property taxes; county taxes may still apply. Alaska: Exempts the first $150,000 of assessed home value for homeowners aged 65-plus.
The $1,000 a month rule is a retirement guideline suggesting you need about $240,000 saved for every $1,000 per month in desired income, based on a 5% annual withdrawal rate (5% of $240k is $12k/year, or $1k/month). It's a simple way to set savings goals, but it doesn't account for inflation, taxes, or other income like Social Security, so it's best used as a starting point, not a complete plan.
You can always withdraw contributions from your Roth IRA without penalty or taxes at any age. However, you will be taxed on the earnings from your Roth if you haven't reach age 59½ or had the account for less than five years.
Leaving a Roth IRA to heirs allows you to pass on tax-advantaged wealth to the next generation for years to come. Make sure you designate a beneficiary or beneficiaries when you open the account, keep your designations up to date, and make changes over time if necessary.