Mixing Conversion Roth with regular Roth
Client has an existing Roth that was opened over 5 years ago and from which she will want to take a withdrawal for a first home sometime in the next few years.
Client has left her employer and wants to roll $5k over from her 401(k) to her Roth. Is there any disadvantage to rolling it into the existing Roth — will it upset the 5 year clock or anything?
Thanks.
Permalink Submitted by Alan Spross on Wed, 2008-01-23 04:04
No, there is no reason not to roll it over to a current Roth. The ordering rules for any distributions she will take include all of her Roth accounts as if they were combined.
You would need to determine if that $5,000 is in a Roth 401k account or a regular pre tax 401k. If a pre tax 401k, a new option this year is a direct rollover to a Roth IRA, but the IRS Regs have not been released yet since this just became available. Therefore, she may want to do the standard transfer to a TIRA and then convert from the TIRA to the Roth IRA.
Note that if or when she uses the first home exception, she has met the 5 year period and therefore up to 10,000 lifetime would be available as a “qualified” Roth distribution, both tax and penalty free.