Roth 401k question
In a Roth 401K question, I am assuming that in these types of plans there is an employer and employee contribution. Can a participant withdrawal part of their initial investment, with out penalty, like in an individually help Roth IRA??
Permalink Submitted by mk foss on Thu, 2011-07-07 16:25
A Roth 401k is a feature that can be added to an employer’s 401k plan. No employer match can be added to the Roth 401k portion of the plan.Distributions from the Roth 401k follow the rules for the rest of the 401k plan. In other words, if you can’t withdraw your 401k deferrals, you can’t withdraw the Roth 401k deferrals.
An advantage of the Roth 401k is that it allows contributions greater than the $5,000/$6,000 available with a Roth IRA.
Permalink Submitted by Eric Woodfill on Thu, 2011-07-07 17:27
Thank you for the information but regarding the question at hand, can a paricipant withdrawal some of their cost basis like in traditional Roth IRAs.
Permalink Submitted by Alan Spross on Thu, 2011-07-07 17:45
Probably not while still employed, at least prior to 59.5.
If the employee separates from service and takes a Roth 401k distribution, there are no ordering rules like there is from a Roth IRA. Any earnings on the deferrals are distributed pro rated with the after tax deferral money. Of course, if the Roth 401k is rolled over to a Roth IRA, then the Roth IRA rules govern. If a non qualified Roth 401k is rolled over to a Roth IRA, the deferrals are counted as regular Roth IRA contributions and the earnings are of course Roth IRA earnings. At that point a Roth IRA distribution would follow Roth IRA rules.