Timeline for Roth 401k rollover into Roth IRA: How are earnings handled?
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22 events
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| Oct 23, 2017 at 17:27 | comment | added | zerpsed | @user102008, yep that's it; all there is to it. Fairly simple in the end but took a lot of effort to get there. | |
| Oct 23, 2017 at 15:30 | comment | added | user102008 | @zerpsed: For distribution from Roth IRA, it matters whether the money is counted as "contribution", "conversion or rollover", or "earnings". My issue was which of those 3 categories a rollover from Roth 401k from Roth IRA falls into. I initially thought it might fall into "conversion or rollover", but found a federal regulation (26 CFR 1.408A-10 A-3) that clarifies that it falls into "contribution" and "earnings" instead, with the amounts of contributions and earnings migrated over from the Roth 401k. So that answers my question. | |
| Oct 23, 2017 at 14:34 | comment | added | zerpsed | @user102008 I ended up needing to know the answer to your question before withdrawing money from my Roth IRA. It took considerable research of IRS publications to find the answer. I did find it though; no citation at this point. The 5 year rule does not apply to contributions only but does apply to earnings. You actually have to look at the statements for your 401K to determine the contribution/earnings split that funded your Roth IRA via rollover. You can rollover and then immediately withdraw the contribution portion from the roll penalty free; not so with the earnings portion. | |
| Sep 12, 2014 at 18:21 | comment | added | user102008 | @Jared: Right, that's about contributions. But we are really wondering about rollovers. | |
| Sep 12, 2014 at 16:27 | comment | added | Jared | @user102008 - so finally found a reference about how you can withdraw your contributions immediately: mymoneyblog.com/… | |
| Sep 3, 2014 at 0:48 | comment | added | user102008 | @Jared: It is always the case that conversions & rollovers are no different penalty-wise from contributions except for the 5-year rule. My point was that according to the 5-year rule, the penalty does not apply to the part of conversions/rollovers that were not includible in income when converted/rolled-over. So according to this, you an rollover a Roth 401k to a Roth IRA and immediately withdraw all of it, without any tax or penalty. Do you agree with this? | |
| Sep 2, 2014 at 17:52 | comment | added | Jared | @user102008 Actually, I believe there is a 5-year rule applied to it, but it is treated as contribution after that. | |
| Sep 2, 2014 at 17:18 | comment | added | user102008 | @Jared: Do you have a citation on that? It seems to contradict what Publication 590 says. | |
| Sep 2, 2014 at 13:42 | comment | added | Jared | @user102008 - Rollover funds are treated entirely as a deposit for Roth IRA withdrawal purposes. Makes rollovers a very valuable way to fund the Roth IRA. | |
| Sep 2, 2014 at 13:39 | vote | accept | zerpsed | ||
| Aug 27, 2014 at 8:11 | comment | added | user102008 | I have a followup question about how the funds rolled over into the Roth IRA are treated. As I understand, withdrawal of rollovers in a Roth IRA is not taxable, and a penalty only applies within 5 years to the amount "that you had to include in income" (which according to your answer should be none). Does that mean I can rollover a Roth 401k (including contributions and earnings) to Roth IRA, and immediately withdraw it, without any tax or penalty? | |
| Aug 27, 2014 at 2:05 | comment | added | Chris W. Rea | Would you perhaps have a link to support your answer? | |
| Aug 26, 2014 at 17:11 | comment | added | zerpsed | @Jared I will wait a while for additional feedback. The second part of the question was also important to me. Wondering if anyone has actual experience with using Fidelity's webapp to do this. I hate calling companies. I'll accept at some point though. | |
| Aug 26, 2014 at 16:04 | comment | added | Jared | @zerpsed Yeah, not trying to be pedantic, just is helpful if you know the terminology they use so you'll know which sections apply (i.e. distribution vs. rollover). Anyway, don't forget to accept the answer unless you're waiting on additional feedback (if so either comment or clarify the quesiton). | |
| Aug 26, 2014 at 16:01 | comment | added | zerpsed | @Jared That's fair, should not have used the word withdrawal. I guess keeping a distribution would be more correct. | |
| Aug 26, 2014 at 15:52 | comment | added | Jared | @zerpsed A qualified distribution is a type of withdrawal. There are also non-qualified distributions, which is another type of withdrawal. IRS docs don't really use the term withdrawal since it would be ambiguous which of these you were referring to. | |
| Aug 26, 2014 at 15:51 | history | edited | Jared | CC BY-SA 3.0 |
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| Aug 26, 2014 at 15:50 | comment | added | zerpsed | @Jared what you are talking about is a withdrawal. | |
| Aug 26, 2014 at 15:49 | comment | added | Jared | @zerpsed - What? You do not take a distribution when you do a rollover. A distribution is you taking money to use, not to go to another qualified retirement account. Just call Fidelity and tell them you want to roll your Roth 401k into a Roth IRA and they'll walk you through it. | |
| Aug 26, 2014 at 15:46 | comment | added | zerpsed | A rollover cannot happen if the 401k does not have any eligible distribution options, so I think the quote still holds water. To your first sentence, I indicated the intention to rollover and did not mention any other ways of taking a distribution such as withdrawal. I get that the simple answer is as you stated, I can make that more clear in my question if you think it is necessary. I'm really looking for actual experience or documentation to back up my own research and any research from the person answering. | |
| Aug 26, 2014 at 14:58 | comment | added | Dilip Sarwate | +1 The OP says that for simplicity "let's assume there are no pre-tax employer match funds in the 401k". The employer match, if any exists and is vested, will roll over into a Traditional IRA that can be converted to a Roth IRA after paying taxes on the money. | |
| Aug 26, 2014 at 14:45 | history | answered | Jared | CC BY-SA 3.0 |