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
Permalink Submitted by Alan - IRA critic on Wed, 2020-06-03 15:13
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.
Permalink Submitted by David Manteau on Thu, 2020-06-04 12:51
Thank You Alan!
Permalink Submitted by David Manteau on Fri, 2020-06-05 04:19
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!