@ianh12 wrote:
The income used to fund my previous employers Roth 401k (established around 2010) was taxed. I rolled over the Roth 401k into a Roth IRA. The rollover triggered a reset of the 5 year rule. Earnings in a Roth IRA may only be withdrawn tax-free when at least five years have passed between these two dates:
Jan. 1 of the tax year you first contributed to a Roth IRA and the the date of the withdrawal. The rollover triggered a reset of the 5 year rule. At least I avoided the 10% penalty, because I'm over 59½ years old.
I'm glad you are happy to ignore advice and pay extra income tax.
For everyone else who might read this, your Roth IRA is not automatically taxable even if it is less than 5 years. Yes, the Roth IRA has a different clock than the 401k, but you still have a basis in the Roth 401k equal to the after-tax contributions you made while you were employed, and withdrawal of your contribution basis is always tax-free, even under 5 years.
The amount of your basis should be recorded on the 1099-R from the rollover from the 401k to the IRA in box 5. (Not the current withdrawal, but the 1099-R from the rollover.) Your contributions will also be on your pay stubs, your W-2s (box 12 code AA) and form 5498 from the 401k.
For example, if you contributed $50,000 over the years to the 401k, that basis rolls over and counts as contribution basis in the Roth IRA. Therefore your first $50,000 of withdrawals from the Roth IRA would be tax-free even if you are less than 5 years into the Roth IRA.
