@TheGuttes wrote:
Just to clarify so the record is complete. She maxed out her personal contribution of $22,500 at each company. At each company she reached her personal max with a combination of contributions to her 401(K) and Roth. She is still at the second company, but has left the first company. If I understand where we are, this means she could (and probably should) transfer the Roth from the first company to a regular after tax saving account, because there is no benefit in leaving that money in the Roth and she can do this because she no longer works at the first company.
Thanks again!
This is far beyond what you need to do.
Note also that unqualified withdrawals (the account is less than 5 years old or the account holder is under age 59-1/2) are subject to income tax and a 10% penalty on the earnings.
The only thing you need to do is withdraw the excess contribution, plus the attributed earnings. You do not need to withdraw the whole amount, unless the only contributions in that account are excess earnings. There is certainly much value in having retirement funds that will be tax-free.
The only thing you need to do is add up the amount of Roth contributions to both employers, and withdraw that amount from the Roth 401k at employer A, plus the attributable earnings. Both the contribution and the earnings are subject to income tax, and the earnings may be subject to a 10% penalty. You can leave the rest of the 401k alone.
You do have the option of withdrawing the entire amount. In that case, expect to pay income tax plus a 10% penalty on any earnings, and income tax on the excess deferral (excess contribution) but any allowable contributions will be tax-free.
