Can You Lose Money in a Roth IRA?

Yes, you can lose money in a Roth IRA. A Roth IRA is an account with tax rules, not an investment that promises a return. What you hold inside it determines how its value can change. A falling balance can feel unsettling; the useful first step is to separate investment risk from bank or brokerage protection.

What can make the balance fall?

Look at the actual holdings on your statement, not just the words “Roth IRA.” Different products have different risks. The SEC’s investing-risk guide explains market, business, inflation and liquidity risks.

• Falling prices or a business failure. Shares and funds can decline; a failed company can leave common shareholders with nothing.
• Interest rates and bond prices. Bonds and bond funds can lose market value. A fund holding insured bonds or government bonds can still lose value when rates change; see the SEC’s bond-fund explanation.
• Costs. Fund expenses, advisory fees and account charges reduce what you keep. Compare the total costs rather than assuming one quoted fee tells the whole story. See the SEC’s fee guide.
• Inflation. A balance can rise in dollars yet buy less if prices rise faster. That is a purchasing-power loss, different from a falling account balance.

Unsold does not mean unharmed

An unrealized loss means you still hold an investment whose value has fallen below its cost. Selling makes the loss realized. Neither word tells you whether the price will recover.

What FDIC and SIPC protection actually mean

Neither system promises that investments will hold their value. They address different problems:

Two protections, different rules — not market-loss insurance

System	What it addresses	Limit and grouping
FDIC deposit insurance	Eligible deposits, such as savings or CDs, at an FDIC-insured bank that fails. Not stocks or mutual funds sold by a bank.	$250,000 per depositor, per insured bank, per ownership category. One owner’s Traditional and Roth IRA deposits at the same bank share the “certain retirement accounts” category.
SIPC customer protection	Missing customer cash and securities at a financially troubled SIPC-member brokerage. Not falling prices or bad investment advice.	$500,000, including a $250,000 cash limit, per customer in a separate capacity. Accounts in the same capacity at the same firm combine; an owner’s Roth IRA and Traditional IRA are separate capacities.

Check FDIC’s ownership-category rules, what SIPC protects and its multiple-account rules. More account numbers do not necessarily mean more protection. Credit-union deposits use a different system; this table is not a guide to every financial product.

Hypothetical bank example: $160,000 in Roth IRA CDs plus $120,000 in Traditional IRA CDs, all owned by the same person at the same insured bank, total $280,000 in that retirement category. Assuming no other deposits in the category, $250,000 is insured and $30,000 exceeds the limit. Opening another IRA CD there does not create another limit.

Can you deduct a Roth IRA loss?

Not as a federal capital-loss deduction. Selling an investment inside the IRA does not create the Schedule D loss you might have from selling in a taxable brokerage account. The IRS’s IRA FAQs distinguish account investment gains and losses from your personal return.

Older articles may describe a limited deduction after closing all Roth IRAs. That former route was a miscellaneous itemized deduction, not an ordinary capital loss. IRS Publication 529 (2020) lists the IRA loss deduction as unavailable. Public Law 119-21, section 70110, later removed the scheduled expiration of the miscellaneous-deduction disallowance. It does not return for 2026. Closing an IRA is not a way around that rule.

A lower balance is not your withdrawal tax calculation

A market decline does not erase your contribution or withdrawal history. For an ordinary, nonqualified withdrawal from your own Roth IRAs, the IRS generally counts remaining regular contributions first, then conversions and certain rollovers, then earnings, using its aggregation rules. Do not treat conversion dollars as regular annual contributions or ignore earlier withdrawals.

Qualified withdrawals are tax-free. They require the Roth five-tax-year period plus age 59½ or another qualifying condition; simply holding an investment for five years is not enough. See Publication 590-B (2025), chapter 2, and our withdrawal guide. A falling balance alone does not tell you whether a particular withdrawal is taxable or subject to an additional tax.

Questions to ask before changing investments

You do not have to turn a scary statement into an immediate trading decision. These questions can make a conversation with a qualified adviser more useful:

• What do I own? Look for overlapping funds, a large single-company position and products you cannot explain.
• When might I need this money? Consider near-term spending, other resources and how much decline you can tolerate, not age alone.
• What does it cost? Ask about investment expenses, advice charges and transaction or exit fees. Our fee-drag calculator illustrates assumptions you choose; it does not predict returns.
• Is the mix still appropriate? Asset allocation and diversification spread exposure across and within types of investments. They can reduce concentration, not eliminate loss or guarantee recovery.

No fixed stock percentage, fund label or “never sell” rule can settle those questions for every reader.

Article update and correction history

October 15, 2026 — Correction: Replaced blanket failure-protection claims with FDIC deposit-category and SIPC custody conditions, limits and aggregation rules. Corrected the claim that a decline is not a loss until sale and the treatment of contribution/conversion records. Removed unsupported historical returns, comparative fee outcomes, investor-behavior claims and universal allocation instructions. The current no-deduction answer remains; replaced an unsupported historical statutory attribution with directly linked authorities. Original publication date is unchanged.

July 28, 2026 — Correction: Corrected the explanation of the former miscellaneous-itemized-deduction route after Public Law 119-21 removed its scheduled expiration. The answer that a 2026 Roth IRA investment loss is not deductible was unchanged. This earlier record remains in the permanent corrections log.