ROTH IRA Withdrawl

[nuggetsmd72]

While employed, I was contributing to a ROTH IRA 401k account. The account was established in Jan2016.

I setup a ROTH IRA in my trading account in Apr2021. I retired in Dec2022. In March 2023 I rolled over all my funds from my ROTH IRA 401k account into my ROTH IRA trading account.

Since my ROTH IRA 401k account meet the 5 year requirement, are those funds available to withdraw from my ROTH IRA trading account even though that account is less than 2 years old?

If no, would it have been better to just cashed out my ROTH IRA 401k account?

This question is one of timing of moneys that have satisfied the ROTH requirements.

Thank you,

Steven D.

[JBedford]

Hi, @nuggetsmd72 , thanks for the question! To answer, the funds are available to withdraw, but I'm not sure if this is exactly what you mean. If you're asking if the earnings can be withdrawn tax-free, then I believe the answer is no. I apologize that I originally misread your question, thinking that your original account was also an IRA, not a 401k. (It can't be both as you stated, so I'm assuming you meant 401k.)

I'm not a financial advisor so I can't say if it would have been better to cash it out, which is now a moot point anyway. But you would have been able to withdraw the earnings tax-free, though perhaps not penalty-free, depending upon your age. 

Hope this helps, please let me know if this raises additional questions! 

[Tax Hero Niki]

Hi nuggetsmd72, 

To add to what Joe says, you can always remove your basis tax-free, as you've already paid taxes on that part.

[Opus 17]

When you withdraw from the Roth IRA, your first withdrawals are from your original contributions. Then your rollovers. Lastly, your earnings.  You can withdraw your original contributions tax free. You can also withdraw the rollover amount from march 2023 tax free. (You do not have to account for whether the rollover is from contributions or earnings.)  If you withdraw the earnings, they will be subject to income tax, since the account is less than five years old.

Whether you should have done something differently is a bit irrelevant at this point. If you want to cash out all of your Roth investments today, the only taxable amount that you would not have had if you had cashed out the Roth 401(k) directly, is any earnings in the Roth IRA between March 2023 and July 2023.

If you simply want to begin making regular withdrawals to support your retirement, they will be tax free, unless you withdraw so much that you dig into the earnings before January 2025.