Roth 401(k) Loan | Ed Slott and Company, LLC

Roth 401(k) Loan

Does the separation of service at age 55 exception for 401(k) apply to Roth 401(k)?

Also, if I have a loan on the Roth 401(k) and separate from service at age 55 (not 59.5) can I use the age 55 as an exception for the offset distribution (assuming the 5-year holding period for my initial contribution is met)?

Thank you

Yes, the age 55 separation penalty waiver applies to distributions from any part of the employer plan. The waiver includes the 10% penalty on an offset distribution on the portion of the Roth 401k allocated to earnings. This is true whether you have held the Roth 401k 5 years or not.  You will still owe ordinary taxes on earnings distributed whether you have met the 5 years or not, since your Roth 401k is not qualified until you are also 59.5 or disabled.

Thank You Alan!

In plans that have pre-tax, Roth, and after-tax accounts, do you know if a loan request can be fulfiled from the after-tax (non-Roth) account? I know a loan can be processed from pre-tax and Roth accounts in a plan but are loans possible from after-tax accounts?Also, how does one use 72(t) to waive the 10% penalty on offset distributions? Thanks!


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