Rolled Over ROTH 401k and Contribution Withdrawal
If I have a client that rolled over their ROTH 401k to an ROTH IRA and then decided he wanted to access some of the monies. Can he take out the contributions that where made into the ROTH portion of the 401k previous to the rollover from the rolled over ROTH IRA without penalty or taxes?
Thanks
Permalink Submitted by Alan - IRA critic on Mon, 2020-03-02 18:23
Yes. When a Roth 401k is rolled to a Roth IRA, the Roth IRA accounting must be updated to integrate the Roth 401k balance into the amount of basis already in the Roth IRA. For example, if client had a regular contribution Roth IRA basis of 20k before the rollover, and the 1099R reporting the direct rollover shows an amount of 5k in Box 5 (amount contributed to the Roth 401k), then client’s Roth IRA will hold 25k of regular contribution basis and the first 25k distributed from the Roth IRA will be tax and penalty free.