Roth 401(k)
Are Roth 401(k)’s subject to the same 5 Year Rules as a Roth IRA? If true, I am assuming that an ” In-Service Withdrawal” would be out of the question if within the first 5 years?
Are Roth 401(k)’s subject to the same 5 Year Rules as a Roth IRA? If true, I am assuming that an ” In-Service Withdrawal” would be out of the question if within the first 5 years?
Permalink Submitted by Alan - IRA critic on Tue, 2025-03-18 13:43
Withdrawals of Roth deferrals are not allowed under age 59.5 at all, irrespective of taxes due. Once eligible for a distribution from a Roth 401k, before the Roth is qualified (5 years and 59.5) a distribution would include a pro rated amount of earnings, and the earnings portion would be subject to tax and penalty.
In other words, a Roth 401k and Roth IRA have the same requirements to be qualified and tax free. But some or all of a Roth 401k balance is not even eligible for distribution, and the tax rules for NQ distributions are different for Roth IRAs and Roth 401ks. For a Roth 401k earnings are included with all NQ distributions, and for a Roth IRA earnings come out last, only after contributions have all been distributed.