RMDs Taxable for Roth 401K less than 5 years old?
I am 71 years old with a Roth Solo 401K just started this year. I realize that i must take an RMD, but is it taxable even though it is a Roth, but less than 5 years old? Also, is there a penalty even though I am over 59 1/2?
Permalink Submitted by Alan - IRA critic on Wed, 2016-11-23 02:07
A non qualified Roth 401k distribution including an RMD pro rates the earnings with the contributions to determine the taxable amount. Since your Roth 401k is probably 90% plus contributions, only a small portion of any RMD will be taxable if you had to take one. Check if the plan document allows you to roll out the balance next month to a Roth IRA. Since you had NO plan balance on 12/31/2015 there is no 2016 RMD required, and if you can roll the balance next month into a Roth IRA, you will have either a 0 or minimum balance on 12/31/2016 which means you would have a very small RMD for 2017 if any. And your Roth IRA will have no RMDs.Even if you take a distribution from the Roth 401k there is never a penalty since you are over 59.5. The only penalty you would face would be caused by failing to take an RMD that was required, but if you can do the rollovers annually you will have no RMD to take or a very small one.