10-Year Rule for inherited Roth 401(k)
I understand that employer Roths do not have annual RMDs for the original participant anymore.
My questions deal with an inherited 401(k) when the owner dies after their RBD.
- Is it true that if the entire 401(k) is Roth money, then the benficiary is under the deaths before RBD rules? For example, Joe dies at with age 80 with $100,000 in his employer’s Roth 401(k) and nothing in his employer’s traditional 401(k). His son is his beneficiary. Is his son’s only RMD requiremenbt to clean out the account by Deember 31st of the year containing the 10th anniversry of his death (as if he died before his RBD like Roth IRAs) or would the son need to take RMD for the each year starting with the year after the death and then have the Roth 401(k) emptied by 12-31 of the year containing the 10th anniverary of Joe’s death?
- What if Joe had $99,500 in his employer’s Roth 401(k) and $500 in his employer’s traditional 401(k)? Does that change the answer from #1 any?
Thank you.
Permalink Submitted by Alan - IRA critic on Wed, 2025-03-26 16:08
Q 1 – Yes, if the entire inherited plan is in a Roth, the 10 year rule applies with no annual RMDs in years 1-9.
Q2 – Yes, that changes the result. It will be rare to inherit a 401k when there is no pre tax balance whatsoever. In the expected case where there is both a Roth and a pre tax 401k balance, if the participant passes after RBD, there will be annual RMDS due in years 1-9 for both the pre tax and the Roth balance. In other words, it is not possible to treat a participant as passing pre RBD for one portion and post RBD for the other portion of the plan. So if the beneficiary is a non spouse, there is an advantage to doing direct rollovers to TIRA/Roth IRA while the participant is still living.
Permalink Submitted by Mike Harris on Wed, 2025-03-26 17:04
Thank you.