My Roth 401k consists of $30,000 in contributions, and $20,000 in earnings. When I rollover into a Roth IRA, can I withdraw only the $30,000 of contributions, or am I required to withdraw the balances proportionately resulting in about $20,000 of contributions, and $10,000 of earnings? The withdrawal will be used to payoff my student loans, which is about $30,000. Also, will I be subject to the 5-year window limitation and be penalized 10% for early withdrawal?
Unlike distributions from a Roth 401(k) that come proportionately from contributions and earnings, distributions form a Roth IRA come first from contributions. Once rolled over to a Roth IRA, distributions from the Roth IRA are governed by Roth IRA distribution ordering rules, so your $30,000 of contributions rolled over from the Roth 401(k) will come out of the Roth IRA first, tax and penalty free.
There is no 5-year window involved with this unless you will reach age 59½ by 5 years from the beginning of the year for which you first made a contribution to a Roth IRA, in which case any distribution from a Roth IRA that you own would be tax and penalty free. You may be thinking about the 5-year rule for Roth conversions (a different 5-year rule), but a rollover from a Roth 401(k) is not a Roth conversion.
Unlike distributions from a Roth 401(k) that come proportionately from contributions and earnings, distributions form a Roth IRA come first from contributions. Once rolled over to a Roth IRA, distributions from the Roth IRA are governed by Roth IRA distribution ordering rules, so your $30,000 of contributions rolled over from the Roth 401(k) will come out of the Roth IRA first, tax and penalty free.
There is no 5-year window involved with this unless you will reach age 59½ by 5 years from the beginning of the year for which you first made a contribution to a Roth IRA, in which case any distribution from a Roth IRA that you own would be tax and penalty free. You may be thinking about the 5-year rule for Roth conversions (a different 5-year rule), but a rollover from a Roth 401(k) is not a Roth conversion.