roth 401k
I have a client who rolled over their 401k Roth to a Roth IRA. She would like to make a distribution and is under 59 1/2. Would she be subject to a 10% penalty and taxes on the earnings only and or is there a penalty/taxes on her contributions. The contributions have only been made to the Roth 401k. Thanks…
Permalink Submitted by Alan - IRA critic on Tue, 2014-07-22 18:28
There was a 1099R issued reporting the Roth 401k rollover showing the amount of contributions made to the Roth 401k in Box 5. This Box 5 amount is treated as if it were regular Roth IRA contributions once in the Roth IRA. At any point in time if the Roth IRA is worth more than those contributions, the balance is earnings. The regular contribution amount comes out first, tax and penalty free. If the distribution is large enough to include earnings, the earnings are subject to tax and penalty. This reply assumes there have been no in plan Roth Rollovers (IRRs) or Roth conversions to the Roth IRA.