5year Rules | Ed Slott and Company, LLC

5year Rules

Roth 401k - If I roll Roth 401k money (let's assume all contributions and no earnings) into a Roth IRA that has been established for over 5 years, can that money be pulled out immediately and not be subject to penalty or does it start its own 5-year clock?

After-Tax 401k - If I roll After-Tax 401k money (let's assume all contributions and no earnings) into a Roth IRA that has been established for over 5 years, can that money be pulled out immediately and not be subject to penalty or does it start its own 5-year clock?

  • You can pull out the Roth 401k deferrals rolled into your Roth IRA. They are treated as if they were regular ROth IRA contributions once in the Roth IRA, so can come out without tax or penalty anytime. However, if you did an in plan Roth rollover (IRR) in the Roth 401k, the 5 year holding period for the IRR continues to run after being rolled to your Roth IRA.  Simpler if you did not do any IRRs.
  • Re the after tax 401k rolled to your Roth IRA - since the rollover is entirely composed of non taxable (after tax) money and the 5 year holding period only applies to taxable Roth rollovers, you effectively have no 5 year holding period for that Roth IRA rollover. However, it is still tracked along with your other Roth IRA conversions, which must come out prior to the Roth rollover from the after tax 401k.

 

 

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