Early Roth IRA Witdrawal

Forum|Forum|6 years ago
September 27, 2019
1 reply
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Four years ago I rolled over money from my 401k into an ira. I put a portion of the rollover amount into an ira and another portion into a roth ira. I want to withdrawal the portion that I rolled over into the roth ira. Will I be taxed or penalized for this withdrawal?

macuser_22

Alumni - Champ

Assuming that the 401(k) contained both before-tax money and after-tax money, and the before-tax money was rolled into Traditional IRA and the after-tax money into a Roth IRA then that becomes your "basis" in the Roth that can be withdrawn at any time both tax and penalty free. Any earnings distributed would be subject to tax and penalty.

When you enter the 1099-R for the distribution answer the follow-up questions that your prior contributions was the amount of after-tax money that was rolled over to establish the basis.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

dmertz

Level 15

However, if the rollover from the 401(k) to the Roth IRA was not entirely from after-tax money in the 401(k), the distribution of from the Roth IRA will come first from the portion that was taxable when rolled over from the 401(k) and will be subject to early-distribution penalty. The ordering rules for Roth IRA distributions have taxable conversions being distributed before nontaxable conversions. Distributions of taxable conversion before 5 years from the beginning of the year in which the conversion occurred are subject to early-distribution penalty even though they are not subject to income tax.

This also assumes that you have no basis in regular Roth IRA contributions that would come out tax and penalty free before any converted amounts.