dmertz
Level 15

Retirement tax questions

Opus 17's reply is incorrect.  If your Roth 401(k) is not yet qualified, when rolled over to the Roth IRA the amount of your contributions to the Roth 401(k) become contribution basis in the Roth IRA.  If your Roth 401(k) is qualified at the time of the distribution from the Roth 401(k), the entire amount of the distribution rolled over from the Roth 401(k) to the Roth IRA becomes contribution basis in the Roth IRA.  Your Roth 401(k) is qualified if at the time of the distribution from the Roth 401(k) you had reached age 59½ and it has been 5 years since the beginning of the year that you first contributed to the Roth 401(k).

 

The Roth 401(k)'s 5-year qualification clock does not transfer to the Roth IRA.  Your 5-year qualification clock for your Roth IRAs starts with the first contribution, rollover or conversion deposited into any of your Roth IRAs.

 

If you did any In-plan Roth Rollovers from the traditional account in the 401(k) to the Roth account in the 401(k), when rolled over to a Roth IRA the amounts of any IRRs become conversion basis in the Roth IRA and retain their 5-year conversion clock (different from the 5-year qualification clock).

 

Distributions from your Roth IRA follow Roth IRA ordering rules.  When distributed from the Roth IRA, your contribution basis comes out first tax and penalty free.  If your 5-year clock for Roth IRAs has been satisfied, any regular distribution from your Roth IRAs is tax and penalty free.

 

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