RMD from Roth 401(k) and 5 year rule
Are RMDs from a Roth 401(k) subject to the penalties from the 5 year rule if the participant has not been part of the plan for 5 years? Thank you!
Are RMDs from a Roth 401(k) subject to the penalties from the 5 year rule if the participant has not been part of the plan for 5 years? Thank you!
Permalink Submitted by Alan Spross on Wed, 2012-07-18 18:52
If taxpayer is still working and not a 5% owner, RMDs can be delayed until retirement. However, if RMDs are required before the Roth 401k has been held 5 calendar years, the RMDs are pro rated between contributions and earnings. The earnings are taxable but there is no penalty.
For this reason, Roth 401ks should generally be rolled over to Roth IRAs at the time of retirement since Roth IRAs follow the ordering rules of contributions out before any earnings.