My question is whether I face a 10% penalty on withdrawing money from a Roth IRA after a mega backdoor Roth. Assume I am younger than 59 years old.

In more detail:

  1. I contribute $10K after-tax to my 401(k). (My plan allows me to do this.)
  2. I do an in-service conversion to a Roth IRA. I now have $10K in my Roth IRA.
  3. Now I need the money. I withdraw $10K from my Roth IRA.

Do I just receive the $10K with no penalty and no taxes (since this is after tax money)?

  • I believe you can only do an in-service conversion from 401k to Roth 401k. The rollover from Roth 401k to Roth IRA can only happen after you've left the company if you're not retirement age.
    – user102008
    Commented Sep 16, 2017 at 16:31
  • @user102008: You're right. I just checked my plan. I suppose the answer to my question is the same whether it's Roth 401k or Roth IRA?
    – Jimothy
    Commented Sep 16, 2017 at 18:05
  • The rules for withdrawing from Roth 401k and Roth IRA are different. But you can't withdraw from 401k (Roth or not) while you are still employed if you're not retirement age anyway, so we can just assume you will leave the company and rollover to Roth IRA before withdrawing it.
    – user102008
    Commented Sep 17, 2017 at 1:01
  • @user102008: Indeed, my bad. Let's assume it ends up in a Roth IRA due to a rollover.
    – Jimothy
    Commented Sep 17, 2017 at 3:22

1 Answer 1


Conversion of after-tax 401K into a Roth is known (on Bogleheads for instance) as a Mega Backdoor Roth IRA. Recent tax rulings seem to allow for this kind of transfer more cleanly.

After conversions, the money is treated as a normal Roth - you don't pay any taxes or penalties on contributions. For investment earnings, the Roth IRA has the standard five-year rule: most commonly - you must hold the account for five years and be 59.5 years old (there are other criteria). Otherwise, you may pay taxes plus a 10% penalty on the earnings portion of your distribution. There are other reasons you can withdraw early - spelled out in IRS Publication 590B Figure 2-1.


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