Roth 401k
I have a question about: The reason you have differences between Roth IRAs and Roth 401(k)s, including required distributions from the Roth 401(k), is that the employer plan rules apply to Roth 401(k) accounts. However, you can get out of the required distributions from the Roth 401(k) by rolling those assets to a Roth IRA before the year you turn 70 ½. –
Do you pay taxes on the roll to a Roth IRA?
Permalink Submitted by Alan - IRA critic on Tue, 2014-02-11 02:19
No, because the plan is rolled over. You must then carefully document the change to your Roth IRA basis. The 1099R from the plan will show the amount of deferrals made to the Roth 401k and this amount is considered to be Roth IRA contributions once in the Roth IRA. If the Roth 401k was qualified (5 years and age 59.5), the entire balance is considered Roth IRA regular contributions unless the amount of deferrals to the Roth 401k is greater and then the larger amount applies.
Permalink Submitted by Rose Robins on Wed, 2014-02-12 22:17
I do not understand “unless the amount of deferrals to the Roth 401k is greater and then the larger amount applies”?
Permalink Submitted by Alan - IRA critic on Wed, 2014-02-12 23:03
The amount of Roth 401k deferrals could be greater than the amount of a full distribution if the investment results were negative. In that case the amount of regular Roth IRA contributions in the Roth IRA as a result of the Roth 401k rollover would be the amount contributed shown in Box 5 of the 1099R. If there are gains in the Roth 401k, then the rollover will include gains and only the Box 5 amount is considered to be regular Roth IRA contributions. The Roth 401k gains would become Roth IRA gains. Again, no taxes are due for the rollover itself, but unless the Roth IRA is itself qualified, you would need to know what balances the Roth IRA is now composed of following the rollover of the Roth 401k balance. Once the Roth IRA is qualified, then there is no longer any need to track the various balances in the Roth IRA.