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caklim00
Joined: 26 May 2008
Posts: 1203
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 Posted: Wed Aug 06, 2008 5:03 pm Post subject: Roth 401K Questions (and Roth 403B) |
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A couple of quick questions regarding the Roth 401K... A regular 401K requires a person to start taking distributions when they reach 70.5.
1) Does a Roth 401K require distributions at 70.5 like a standard 401K?
2) Can someone roll over a Roth 401K to a Roth IRA with no tax consequences? Also, any income limitations?
3) I'm assuming if one can roll over to a Roth IRA then he/she would not be required to take distributions starting at 70.5. Is this logic correct?
Last edited by caklim00 on Wed Aug 06, 2008 10:28 pm; edited 1 time in total |
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LH2004
Joined: 27 Mar 2007
Posts: 1745
Location: New York, NY
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| Posted: Wed Aug 06, 2008 5:08 pm Post subject: Re: Roth 401K Questions |
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| caklim00 wrote: | | 1) Does a Roth 401K require distributions at 70.5 like a standard 401K? |
Yes.
| Quote: | | 2) Can someone roll over a Roth 401K to a Roth IRA with no tax consequences? Also, any income limitations? |
Yes. No.
| Quote: | | 3) I'm assuming if one can roll over to a Roth IRA then he/she would not be required to take distributions starting at 70.5. Is this logic correct? |
Well. If you DO roll over, you are then free from required distributions. Just that you CAN roll over doesn't do it. |
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caklim00
Joined: 26 May 2008
Posts: 1203
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| Posted: Wed Aug 06, 2008 7:58 pm Post subject: |
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| Are there any long term benefits to keeping the money in the 401K versus rolling over to an IRA (besides more available funds)? |
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aaronchall
Joined: 05 Aug 2008
Posts: 26
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| Posted: Wed Aug 06, 2008 8:12 pm Post subject: |
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Are there long term benefits to keeping money in the 401k? No. Less available funds and higher expenses are usually reasons to move out of a 401k.
The only reason people usually choose to stay in a 401k is if they are or going to be between 55 and 59.5, don't wish to take rule 72t, and want to withdraw some money without penalty. If you roll over to a Roth or Traditional IRA, you either have to take rule 72t or wait until you are 59.5 to withdraw money.
I hope this helps!
Aaron
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I blog! See my thoughts on the market and investing, click my website below! |
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LH2004
Joined: 27 Mar 2007
Posts: 1745
Location: New York, NY
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| Posted: Wed Aug 06, 2008 8:13 pm Post subject: |
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| caklim00 wrote: | | Are there any long term benefits to keeping the money in the 401K versus rolling over to an IRA (besides more available funds)? |
None that amount to much.
You have an essentially meaningless advantage in a plan over an IRA in creditor protection. You can invest in life insurance, but you don't want to. You can invest tax-free in leveraged real estate, or (maybe) state tax-free in active businesses, but you don't want to do those, either.
Note that there are no RMD's from a 401(k) plan if you're still working for the sponsoring employer, as long as you're not an owner of the employer. |
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LH2004
Joined: 27 Mar 2007
Posts: 1745
Location: New York, NY
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| Posted: Wed Aug 06, 2008 8:15 pm Post subject: |
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| aaronchall wrote: | | If you roll over to a Roth or Traditional IRA, you either have to take rule 72t or wait until you are 59.5 to withdraw money. |
No, you don't.
Only the taxable part is subject to the section 72(t) penalty. With a Roth IRA, your contributions come out first and are not taxable. |
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aaronchall
Joined: 05 Aug 2008
Posts: 26
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| Posted: Wed Aug 06, 2008 9:28 pm Post subject: Good point |
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good point, LH, Roth contributions come first and allowed out without the IRS penalty at any time.
Thanks for catching that.
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I blog! See my thoughts on the market and investing, click my website below! |
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caklim00
Joined: 26 May 2008
Posts: 1203
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| Posted: Wed Aug 06, 2008 10:30 pm Post subject: |
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| One final question, does it make any difference whether it is a 401K or a 403B? I'm assuming the same rules exist for a Roth 401B as a Roth 401K, including Rollover to Roth IRA. Correct? |
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LH2004
Joined: 27 Mar 2007
Posts: 1745
Location: New York, NY
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| Posted: Wed Aug 06, 2008 10:37 pm Post subject: |
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| caklim00 wrote: | | One final question, does it make any difference whether it is a 401K or a 403B? I'm assuming the same rules exist for a Roth 401B as a Roth 401K, including Rollover to Roth IRA. Correct? |
Yes.
On average, 403(b)'s are worse, but not for any reasons that relate to being 403(b)'s. The decision is going to come down to how the particular plan's investment choices are. |
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