@dmertz
In my case, if I were to take a distribution from my Roth 401K, it would be considered a qualified distribution as I do meet the qualified distribution requirements for the Roth 401K (over 591/2 old and Roth 401K account is 15 years old), however a distribution from my Roth 401K has never been made.
I need to clarify a few things from your previous response.
I just opened my first Roth IRA and so 2025 is first of 5 years going forward with the Roth IRA.
So far I have only rolled over a portion of my Roth 401K to Roth IRA. For discussion purposes, lets say the total value of my 401K prior to the rollover was $300K of which $140K was reflected as contributions while I was employed ($$ I contributed from my monthly paychecks) and $160K was considered earnings (amount my account grew on top of my direct contributions). The ratio of contributions to earnings would be 47% contributions / 53% earnings.
Of the $300K balance in Roth 401K, I rolled over $200K
Fidelity is telling me the $200K rollover is a non-taxable event, however none of the $200K is considered a contribution to the new Roth IRA as it is considered a rollover and not a contribution and the basis of the Roth 401K will become the basis for the Roth IRA. Therefore the ratio of contributions to earnings (47%/53% respectively) will apply to the $200K of rolled over funds. This would calculate to $94K being treated as contribution and $106K treated as earnings (not to confuse with the entire $200K rollover is non-taxable event). This ratio split would only come into play if I take a distribution prior to the 5 year period.
If I understood you correctly, I thought you were previously saying if the funds in my Roth 401K could be considered a qualified distribution (if I had taken one), then 100% of the funds rolled over to the new Roth IRA would be treated as a contribution to the Roth IRA with no earning attached. If I understood this correctly, then any growth above & beyond the $200K would be considered earnings and this would come into play should I take an unqualified distribution from the Roth IRA before the 5 year period is up.
So what I need to confirm/clarify is if I were to take $125K unqualified distribution from the new Roth IRA before 2030, would there be any taxable implications based on the ordering rules (contributions 1st, earnings 2nd)?
Again, the Roth 401k is older than 5 years and I'm older than 591/2 years and no distribution was made from the Roth 401K, only rolled over to Roth IRA.
What is the determining factors for the basis of Roth 401K becoming the basis for Roth IRA rollover?
Thank you in advance for your clarifications1
