Roth 401k rollover
My client is 52 yrs old and recently opened a Roth IRA one month ago to rollover his Roth 401k from a previous employer. The check ($9,500) received from the previous custodian did not separate earnings from contributions and was deposited into his Roth IRA yesterday with a different custodian. The client now wants to withdraw the $9500 to pay off his credit card debt. What are the penalties for this if there are any and how would this be handled at tax time? He has another traditional IRA but no other outside funds and I am trying to save him from any penalties. Thank you.
Permalink Submitted by Alan - IRA critic on Thu, 2013-09-05 19:54
Does he have any Roth IRA balance besides the 9,500? If not and 9,500 is the total, only the amount of his actual deferrals can come out tax and penalty free. His deferrals could be more (if losses) or less (if gains) than the 9,500. The deferral amount can be provided by the employer and MUST show on the 1099R issued next January. Amounts of earnings in the 9,500 will be subject to tax and penalty. If he has any other Roth IRAs, please advise.