Roth 401(k) rollover to New Roth IRA

Submitted by Scott Coenen on Thu, 2023-11-30 21:48

There seems to be confusion on the 5 year withholding period.

If the Roth is opened up at the same time the Roth 401(k) money is rolled in, does the account need a 5 year holding period in order to take out earnings tax free?

I’m getting feedback that the 5 years would include when the Roth 401 (k) had its first contribution. Or does the Roth IRA have to be 5 years so they could only withdraw contributions tax free.



Submitted by Alan - IRA critic on Fri, 2023-12-01 00:17

  • A 5 year holding period for the Roth IRA itself is required (along with being 59.5) before any gains generated in the Roth IRA are tax free.
  • If the Roth 401k itself had been held 5 years and participant was 59.5, then the entire balance rolled into the Roth IRA is treated as Roth IRA basis and can be distributed tax free.
  • If the Roth 401k was not yet qualified when rolled over, only the amount of contributions to the Roth 401k can be treated as Roth IRA basis. The earnings from the Roth 401k will not be qualified until the Roth IRA is itself qualified.

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