ROLLONG OVER A ROTH 401K
If someone contributed to a Roth 401k, separates from service, and wants to rollover the account—but wants to take his contributions out first—do the pre-tax funds roll into a Roth IRA or a Traditional?
If someone contributed to a Roth 401k, separates from service, and wants to rollover the account—but wants to take his contributions out first—do the pre-tax funds roll into a Roth IRA or a Traditional?
Permalink Submitted by Alan Spross on Thu, 2012-09-27 19:31
He should have the Roth 401k portion distributed to the taxpayer. Taxpayer then rolls over the earnings within 60 days to a Roth IRA. Amounts rolled over are deemed to apply to the taxable amount first.
The pre tax (non Roth) 401k account can be directly rolled over to a traditional IRA from the plan to avoid withholding. There is usually a pre tax 401k balance since any employer matching contribution must go into the pre tax 401k account. There will be a separate 1099R issued for each distribution.
NOTE: The taxable portion of the Roth 401k distribution (the earnings) must be rolled over to a Roth IRA, not a TIRA. Only the pre tax 401k balance goes into a TIRA.