Early Roth IRA Withdrawal from a Roth 401k Rollover
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Anonymous
Not applicable

Early Roth IRA Withdrawal from a Roth 401k Rollover

I have both a traditional 401k and a Roth 401k from my current company. Some of the money in the account is from a previous employer that I rollover into the new employer. I had both traditional 401k and a Roth 401k at my previous company as well. 

ROLLOVER
1) If I leave my current employer can I have the Traditional 401k transferred to a Traditional IRA and the Roth 401k transferred to a Roth IRA? 

1A) Do I have any taxes or penalties on this approach for a direct rollover?

WITHDRAWAL from IRA (NOT QUALIFIED) 
All questions below are for a non-qualified withdrawal distribution
2) If I need to take a distribution from the Roth IRA (the Roth 401k money that was just rolled over to the Roth IRA), can I do it immediately after the rollover or do I have to wait? 

2A) Is there any penalties with taking a withdrawal from a Roth IRA that was rolled over from a Roth 401k? Particularly, with a withdrawal from the contribution amount of the now Roth IRA? 

For example, say I have $30k in 401k total, with $15k in Traditional and $15k in Roth 401k that gets transferred into the two IRAs. 
Say that from the $15k in the Roth Account, I have $10k in after-tax 401k contributions and $5k in growth/earnings. 
Can I immediately withdrawal the $10k in after-tax contribution from the converted Roth IRA and avoid taxes/penalties?  This would leave the $15k in the Traditional IRA and the $5k from the growth/earnings in the Roth IRA. Is this possible without taxes and penalties? 

Note: Due to my age and years of contributing, I don't meet the qualified distribution requirements on either 401k or IRA.
5 Replies
Level 15

Early Roth IRA Withdrawal from a Roth 401k Rollover

ROLLOVER
1) If I leave my current employer can I have the Traditional 401k transferred to a Traditional IRA and the Roth 401k transferred to a Roth IRA?   YES YOU CAN.

1A) Do I have any taxes or penalties on this approach for a direct rollover?  NONE

WITHDRAWAL from IRA (NOT QUALIFIED) 
All questions below are for a non-qualified withdrawal distribution
2) If I need to take a distribution from the Roth IRA (the Roth 401k money that was just rolled over to the Roth IRA), can I do it immediately after the rollover or do I have to wait?   NO NEED TO WAIT

2A) Is there any penalties with taking a withdrawal from a Roth IRA that was rolled over from a Roth 401k? Particularly, with a withdrawal from the contribution amount of the now Roth IRA? NONE IF YOU DON'T TOUCH THE EARNINGS 

For example, say I have $30k in 401k total, with $15k in Traditional and $15k in Roth 401k that gets transferred into the two IRAs. 
Say that from the $15k in the Roth Account, I have $10k in after-tax 401k contributions and $5k in growth/earnings. 
Can I immediately withdrawal the $10k in after-tax contribution from the converted Roth IRA and avoid taxes/penalties?  YES YOU CAN 

This would leave the $15k in the Traditional IRA and the $5k from the growth/earnings in the Roth IRA. Is this possible without taxes and penalties? THAT IS HOW IT WORKS

Note: Due to my age and years of contributing, I don't meet the qualified distribution requirements on either 401k or IRA.
New Member

Early Roth IRA Withdrawal from a Roth 401k Rollover

How is this reported using TurboTax if you have two subsequent distributions from that Roth IRA in two separate years? Do we use the amount that’s in box 5 on the 1099-R from the 401k Plan when the software asks about previous years Roth IRA Contributions?
Level 15

Early Roth IRA Withdrawal from a Roth 401k Rollover

Once you have recouped all the contributions then you invade the earnings ... on a ROTH withdrawal there will not be a box 5 entry.  If you are over the age of 59.5 and the IRA has been open for some part of 5 years then there is no taxes or penalties on the withdrawals.   Follow the program interview carefully and answer the questions as required.
Level 15

Early Roth IRA Withdrawal from a Roth 401k Rollover

If the distributions from the Roth IRA occurred in years following the year of the rollover from the Roth 401(k) into the Roth IRA and there were no intervening distributions from the Roth IRA, yes, include the amount from box 5 of the code H Form 1099-R in the Roth IRA Contributions box.  If there were intervening distributions, make sure that the value that you enter as your Roth contribution basis is your total basis from Roth IRA contributions and rollovers from a Roth 401(k) has been reduced by the amount of the intervening distributions.
New Member

Early Roth IRA Withdrawal from a Roth 401k Rollover

Thanks, dmertz! That’s helpful.
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