DRA and Roth IRA
Hi:
If a client contributed to his employers Roth 401k and has held it for 2 years (he has no other Roth 401ks anywhere) can he roll it into his Roth IRA next year upon retirement and avoid the 5 year rule pertaining to the plan? His Roth IRA was established in 2008. So, what I’m trying to ask is can he avoid the 5 year plan requirement for a qualified distribution by rolling it into his Roth which is over 5 years old? Thx
Permalink Submitted by Alan - IRA critic on Fri, 2021-12-17 22:43
Yes, but his Roth IRA is not qualified until he reaches 59.5. At that time the entire Roth IRA including any Roth 401k balance rolled into it will be tax and penalty free. If not yet 59.5, the amount contributed to the Roth 401k will be treated as a regular Roth IRA contribution, and that amount is available anytime without tax or penalty.