ROTH 401K ROLLOVER TO ROTH IRA

Submitted by Ramon Perez on Thu, 2013-09-05 03:10

My wife (47) and I (61)have a LLC in which only the both of us are full timers.
We are contributing the max to both our ROTH 401K AND OUR ROTH IRA respectfully every year. We also both have the 401K which are were the ROTH 401K are under, but we contribute minimally to our 401K
Both of our ROTH IRA’s are over 5 years old. Both ROTH 401K are under 5 years.

When and how many times could we roll over our ROTH 401K earnings to our respectful ROTH IRA’s?
If we can perform multiple transfer; do we have to wait more than one year in between transfers?



Submitted by Alan - IRA critic on Thu, 2013-09-05 04:49

Your 401k plan provisions determine when you can take distributions from the plan. You might be able to do so since you are over 59.5. Earnings cannot be separated from your deferrals. Since your Roth 401ks are not yet qualified, the holding period of the deferrals follow your Roth IRA holding period. So if your Roth IRA has 5 years, the Roth 401k funds become qualified when they reach the Roth IRA. Otherwise, the Roth 401k deferrals are treated as Roth IRA contributions and the earnings are treated as Roth IRA earnings. Of course, your wife’s Roth IRA cannot be qualified until she reaches 59.5 even though she may have met the 5 year Roth IRA holding period. If your plan allows distributions there is probably no limit on the frequency. A year end 1099R will just add up the total and indicate how much of the rollovers are considered deferrals. The difference would be earnings.



Submitted by Ramon Perez on Thu, 2013-09-05 15:56

First of all thank you for you prompt answer. Provided that the ROTH IRA account is more than 5 years.Our purpose is to just roll over. Does my wife (47) needs to wait until she is 59.5 to roll over her ROTH 401K to her ROTH IRA?  Is rolling over considered a distribution before 59.5?If done before and performimg a institutional transfer does that means she will be subject to the 10% penalty?



Submitted by Alan - IRA critic on Thu, 2013-09-05 19:39

If your wife no longer works for the company with the Roth 401k, she can do a direct rollover anytime. These are not taxable, but are reported as a distribution and rollover on line 16 of Form 1040. There is no tax or penalty, but her Roth IRA will not be qualified until age 59.5. Before then, she would just need to keep track of how much of her Roth IRA is considered regular contributions, how much is from conversions and the value over and above those totals would be earnings. If she still works there, she will probably have to wait until 59.5 to do a full rollover.



Submitted by Ramon Perez on Fri, 2013-09-06 20:43

Thank you very much, you have ben very helpful.



Submitted by mk foss on Thu, 2013-09-05 20:56

I changed jobs from an employer with a Roth 401k to one without. The plan administrator sent a check made out to the custoidan of my Roth IRA and an explanation of how much of the check was contributions and how much was earnings. I believe that’s the typical way this is handled.



Submitted by Alan - IRA critic on Thu, 2013-09-05 23:47

Yes, it’s possible that the Roth k distribution check is less than the deferred amount due to investment losses. Nonetheless your Roth IRA is credited with additional basis from regular contributions in the amount you contributed in that case and this could reduce your Roth IRA earnings. For example, if your Roth IRA was worth 27,000 and had 2,000 of earnings BEFORE the rollover, a rollover of 9,500 with deferrals of 11,500 would leave you with a Roth IRA worth 36,500 composed of all contributions and no earnings.



Submitted by Randi Wright on Mon, 2013-11-11 04:40

With all the bad news going around these days, people who have 401(k) policies have some good news. Earnings on 401(k) policies have been creeping up over the past year according to press releases from several outlets. Article source: https://personalmoneynetwork.com/cash-advance



Submitted by Michael Gustafson on Tue, 2016-04-12 15:13

I have a client that Rollover there Roth 401k to there Roth IRA in 2013. Rolled $18,100 of which $14,575 was contributions.  The Roth IRA that they rolled it into had been in place since 2010.  They now want to take a distributon from the Roth IRA and are under age 59 1/2.    I assume they can take out the basis of what they contributed to the original ROth IRA and the basis that was rolledover in 2013 with out a claiming it as income and also avoiding the 10% penalty?Do they need to file any special tax forms?Thanks.  



Submitted by Alan - IRA critic on Tue, 2016-04-12 20:30

This is reported on Form 8606 like any other non qualified Roth IRA distribution under the Roth ordering rules. As is always the case, the client must know the current balance of Roth IRA regular contributions and conversion contributions. The 14,575 of Roth 401k contributions are added to client’s balance of regular Roth IRA contributions, and these amounts come out first, tax and penalty free. Next out are conversions, oldest first. Last out are the earnings after all Roth IRA basis has been distributed. Note that the 3,525 of earnings in the Roth 401k does not add to Roth IRA basis. It either increases existing Roth IRA earnings or if the value of the Roth IRA is less than Roth IRA basis, then that 3,525 effectively is treated as basis. Sounds complex, but Roth IRA earnings at any point in time is the excess of the account value over Roth basis. No special tax forms, but if client does not keep track of the composition of the Roth IRA, then he has some research to do in order to report the distribution.



Add new comment

Log in or register to post comments