Roth 5yr rule with 410k Roth
Client has Roth with our firm which was started over 5yrs ago.
She is now starting a 401k Roth with her employer.
Question:
- The 5yrs are already completed with the Roth at our firm, correct?
- or does she have another 5yr time frame for the employer Roth 401K
Thank you,
Doulgas
Permalink Submitted by Alan - IRA critic on Tue, 2025-03-25 15:10
Each plan has a 5 year holding period. The Roth 401k balance will not be qualified until age 59.5 and 5 years holding period. But if the Roth 401k is rolled into a Roth IRA that is already qualified, the Roth 401k balance will also be qualified.
Permalink Submitted by Douglas Bauerband on Mon, 2025-03-31 11:31
Does the 5yr holding period also include managed account Roth’s and mutual fund Roth IRA’s?
Example: someone has a Roth IRA with a bank for over 5yrs and wants to keep it, but opens a new Roth IRA with a mutual fund company or managed account…they still have a new 5yr holding period?
What about a Roth IRA that was opened for over 5yrs, then they used for an emergency or some other reason and open a new Roth IRA…they have to wait another 5yrs on the new Roth IRA?
Thank you for the clarification.
Douglas
Permalink Submitted by Alan - IRA critic on Tue, 2025-04-01 16:24
The 5 year holding period for a Roth IRA starts with the first contribution that is not an excess contribution. That holding period applies to all future Roth accounts wherever held. And even if all Roths are closed for a period of time, the first Roth contribution continues to start the holding period if future Roth contributions are made.