401K ROTH ROLLOVER
If a client rollover his 401k Roth because he is no longer employed by the company. Does that reset the 5 year wait period on contribution withdrawals? He has contributions over the last 9 years into that plan.
Thanks
If a client rollover his 401k Roth because he is no longer employed by the company. Does that reset the 5 year wait period on contribution withdrawals? He has contributions over the last 9 years into that plan.
Thanks
Permalink Submitted by Alan - IRA critic on Fri, 2025-02-07 15:23
The holding period does not transfer to the Roth IRA. However, if the Roth 401k was not yet qualified (not yet age 59.5), the amount that was contributed to the Roth 401k is treated as regular Roth IRA contributions, available to withdraw any time tax and penalty free. The amount contributed to the Roth 401k will be in Box 5 of the H coded 1099R issued to report the direct rollover to the Roth IRA.
If the Roth 401k was qualified (5 years and 59.5) then the entire value rolled over is treated as regular Roth IRA contributions.
But for additional gains generated in the Roth IRA, the Roth IRA must itself be qualified for those gains to be tax free.