Roth 403b rmd question

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Digger1000
Posts: 3
Joined: Sat May 13, 2017 4:27 pm

Roth 403b rmd question

Post by Digger1000 » Wed Jul 11, 2018 1:39 pm

Does a Roth 403b have rmd at age 70.5? I know Roth IRA does not but Roth 401k does.

Thanx for any help.

User avatar
CyclingDuo
Posts: 1778
Joined: Fri Jan 06, 2017 9:07 am

Re: Roth 403b rmd question

Post by CyclingDuo » Wed Jul 11, 2018 1:56 pm

Digger1000 wrote:
Wed Jul 11, 2018 1:39 pm
Does a Roth 403b have rmd at age 70.5? I know Roth IRA does not but Roth 401k does.

Thanx for any help.
Yes. A Roth 401k/403b both have RMD's. They are treated the same.
"Everywhere is within walking distance if you have the time." ~ Steven Wright

MathWizard
Posts: 3047
Joined: Tue Jul 26, 2011 1:35 pm

Re: Roth 403b rmd question

Post by MathWizard » Wed Jul 11, 2018 2:13 pm

You can roll over the ROTH 403b into a ROTH IRA, and avoid the RMD.

There is a five year rule, but that applies to when you first opened the
ROTH IRA. So if you have a ROTH 403b (or ROTH 401k) the open a ROTH IRA
as soon as you can, even if it is only $100, so that you have somewhere to
roll the 403b into.

See:

Code: Select all

https://www.investopedia.com/articles/personal-finance/063015/roth-401k-vs-roth-ira-one-better.asp

tenkuky
Posts: 567
Joined: Sun Dec 14, 2014 4:28 pm

Re: Roth 403b rmd question

Post by tenkuky » Wed Jul 11, 2018 3:09 pm

Is the 5-year rule for Roth IRA for each one or just the oldest one?
For example: I want to do Roth 403b deductions at work for a bit, and when I separate, roll it over into a Roth IRA.
Easier to do within trustee aka Fidelity which will be a new Roth IRA.
However, have had Roth IRA with Schwab for >15 years.
So is the Fido Roth "grandfathered" in age or will I need to do 2 rollovers, first internal and then ACATS from Fido to Schwab?

Thanks, and sorry if I hijacked this thread!

ExitStageLeft
Posts: 974
Joined: Sat Jan 20, 2018 4:02 pm

Re: Roth 403b rmd question

Post by ExitStageLeft » Wed Jul 11, 2018 3:37 pm

tenkuky wrote:
Wed Jul 11, 2018 3:09 pm
Is the 5-year rule for Roth IRA for each one or just the oldest one?
For example: I want to do Roth 403b deductions at work for a bit, and when I separate, roll it over into a Roth IRA.
Easier to do within trustee aka Fidelity which will be a new Roth IRA.
However, have had Roth IRA with Schwab for >15 years.
So is the Fido Roth "grandfathered" in age or will I need to do 2 rollovers, first internal and then ACATS from Fido to Schwab?

Thanks, and sorry if I hijacked this thread!
The date the oldest one was established is what matters to the IRS.

User avatar
chasingbutterflies
Posts: 61
Joined: Fri Apr 17, 2015 1:19 pm

Re: Roth 403b rmd question

Post by chasingbutterflies » Wed Jul 11, 2018 4:19 pm

I have a question about the Roth's as well. I'm 45 currently and opened a roth in 1998. I have about 13k regular contributions in it but everything else is either a conversion or a 'backdoor' contribution. Am I right that until I'm 59 1/2 I can only withdraw the 13k without penalty? A backdoor contribution is actually a conversion so that can't be withdrawn until I'm over 59. Is that correct?

Alan S.
Posts: 7794
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Roth 403b rmd question

Post by Alan S. » Wed Jul 11, 2018 4:58 pm

chasingbutterflies wrote:
Wed Jul 11, 2018 4:19 pm
I have a question about the Roth's as well. I'm 45 currently and opened a roth in 1998. I have about 13k regular contributions in it but everything else is either a conversion or a 'backdoor' contribution. Am I right that until I'm 59 1/2 I can only withdraw the 13k without penalty? A backdoor contribution is actually a conversion so that can't be withdrawn until I'm over 59. Is that correct?

Once you have withdrawn all your regular Roth contributions, you withdraw your conversions starting with the oldest conversions. Conversions more than 5 years old come out without tax or penalty, just like regular contributions. Under 5 years, conversions come out without tax but the 10% penalty applies to the taxable portion of the conversion at the time of the conversion.


For example, back door Roth conversions typically are not taxable except for a small amount of earnings. So if you converted 5550 that included 50 of earnings, the 50 comes out first, subject to penalty ($5), then the 5500 without tax or penalty etc. Only earnings are subject to both tax and penalty until your Roth is qualified, and hopefully you could not get into a situation where you had to drain that much of your Roth.

ExitStageLeft
Posts: 974
Joined: Sat Jan 20, 2018 4:02 pm

Re: Roth 403b rmd question

Post by ExitStageLeft » Wed Jul 11, 2018 5:05 pm

chasingbutterflies wrote:
Wed Jul 11, 2018 4:19 pm
I have a question about the Roth's as well. I'm 45 currently and opened a roth in 1998. I have about 13k regular contributions in it but everything else is either a conversion or a 'backdoor' contribution. Am I right that until I'm 59 1/2 I can only withdraw the 13k without penalty? A backdoor contribution is actually a conversion so that can't be withdrawn until I'm over 59. Is that correct?
The principal from each conversion should be available for withdrawal after a five year period.

https://www.kitces.com/blog/understandi ... nversions/

Alan S.
Posts: 7794
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Roth 403b rmd question

Post by Alan S. » Wed Jul 11, 2018 5:13 pm

Digger1000 wrote:
Wed Jul 11, 2018 1:39 pm
Does a Roth 403b have rmd at age 70.5? I know Roth IRA does not but Roth 401k does.

Thanx for any help.

Yes, a Roth 403b has RMDs at 70.5 unless you are still working for the plan sponsor. If you want to avoid those RMDs you must roll the Roth 403b to a Roth IRA before the year you reach 70.5 if you have retired. If not, you have an RMD due for the year of the rollover. Remember that distributions from a Roth 403b come out pro rated between contributions and earnings so would have a taxable portion if the Roth is not yet qualified.

However, there is an IRS rule that allows the total RMD for 403b to be satisfied from either the pre tax 403b or the Roth. However, many plans do not allow you to aggregate the RMD this way and require separate RMDs from each sub account. And even if your plan allows you to take the RMD fully from the pre tax portion, your tax bill for the RMD will be higher as a result. While no RMD is taken from the Roth portion, the balance in the Roth causes your total RMD to be higher and you would then be drawing down the pre tax account faster.

Finally, remember that if you have more than one 403b account you can also aggregate your RMDs between them like IRAs. For example, assume you are retired and have a pre tax 403b with employer A and with employer B your 403b holds both pre tax and Roth balances. Your RMD options have now become a complex mix and match situation.

User avatar
chasingbutterflies
Posts: 61
Joined: Fri Apr 17, 2015 1:19 pm

Re: Roth 403b rmd question

Post by chasingbutterflies » Wed Jul 11, 2018 6:09 pm

Once you have withdrawn all your regular Roth contributions, you withdraw your conversions starting with the oldest conversions. Conversions more than 5 years old come out without tax or penalty, just like regular contributions. Under 5 years, conversions come out without tax but the 10% penalty applies to the taxable portion of the conversion at the time of the conversion.
So to be clear, I did my first conversion from a rollover IRA for 11k in Nov of 2014. That 11k would be available for withdrawal in Nov of 2019? I don't plan on withdrawing any of it but it's nice to know in case of extreme emergency.

ExitStageLeft
Posts: 974
Joined: Sat Jan 20, 2018 4:02 pm

Re: Roth 403b rmd question

Post by ExitStageLeft » Wed Jul 11, 2018 6:16 pm

chasingbutterflies wrote:
Wed Jul 11, 2018 6:09 pm
Once you have withdrawn all your regular Roth contributions, you withdraw your conversions starting with the oldest conversions. Conversions more than 5 years old come out without tax or penalty, just like regular contributions. Under 5 years, conversions come out without tax but the 10% penalty applies to the taxable portion of the conversion at the time of the conversion.
So to be clear, I did my first conversion from a rollover IRA for 11k in Nov of 2014. That 11k would be available for withdrawal in Nov of 2019? I don't plan on withdrawing any of it but it's nice to know in case of extreme emergency.
Based on my read of the Kitces article, the principal (how much you contributed) will be accessible in November of 2019. The earnings won't be accessible without penalty until age 59-1/2.

Alan S.
Posts: 7794
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Roth 403b rmd question

Post by Alan S. » Wed Jul 11, 2018 6:33 pm

chasingbutterflies wrote:
Wed Jul 11, 2018 6:09 pm
Once you have withdrawn all your regular Roth contributions, you withdraw your conversions starting with the oldest conversions. Conversions more than 5 years old come out without tax or penalty, just like regular contributions. Under 5 years, conversions come out without tax but the 10% penalty applies to the taxable portion of the conversion at the time of the conversion.
So to be clear, I did my first conversion from a rollover IRA for 11k in Nov of 2014. That 11k would be available for withdrawal in Nov of 2019? I don't plan on withdrawing any of it but it's nice to know in case of extreme emergency.

For purposes of the 5 year conversion holding period, all conversions are considered done on 1/1 of the conversion year. Therefore, the 5 year holding period for your 11/14 will be completed on 1/1/2019 and that conversion can be withdrawn without tax or penalty starting 1/1/2019, not 11/2019. Most people do not have a system of tracking the status of their Roth IRA, so if an emergency pops up they may have to guess the amount they could distribute before tax or penalty hits. To avoid this, best to update the status of your Roth IRA at least once a year, probably around tax time unless you are very sure there will be no need for a distribution before the Roth is qualified. After that, you can forget all that documentation and you also no longer need to file Form 8606 to report a Roth distribution.

Digger1000
Posts: 3
Joined: Sat May 13, 2017 4:27 pm

Re: Roth 403b rmd question

Post by Digger1000 » Fri Jul 13, 2018 7:19 am

So I am 52 and retired last year. I am somewhat confused about what was posted above as far as when would be the best time to rollover the Roth 403b to a Roth IRA. I only started the Roth 403b about 4 years ago but I contributed the max. so its a somewhat decent amount. None of that is taxable if I do a rollover anytime right(and no penalties of any kind)? I can roll it over anytime before age 70, including this year, and none of that rollover event is taxable right? And none of the distributions are ever taxable after 59.5 right? The info in this thread is very helpful.

Another question. I'm going to be converting every year a portion of a traditional(regular) 403 over to a Roth IRA. Does that need to be done by Dec 31 or do you have till April 15 for it count as 2018 income?

ExitStageLeft
Posts: 974
Joined: Sat Jan 20, 2018 4:02 pm

Re: Roth 403b rmd question

Post by ExitStageLeft » Fri Jul 13, 2018 2:13 pm

Digger1000 wrote:
Fri Jul 13, 2018 7:19 am
So I am 52 and retired last year. I am somewhat confused about what was posted above as far as when would be the best time to rollover the Roth 403b to a Roth IRA. I only started the Roth 403b about 4 years ago but I contributed the max. so its a somewhat decent amount. None of that is taxable if I do a rollover anytime right(and no penalties of any kind)? I can roll it over anytime before age 70, including this year, and none of that rollover event is taxable right? And none of the distributions are ever taxable after 59.5 right? The info in this thread is very helpful.

Another question. I'm going to be converting every year a portion of a traditional(regular) 403 over to a Roth IRA. Does that need to be done by Dec 31 or do you have till April 15 for it count as 2018 income?
You are correct that a rollover is not a taxable event. You are also correct that a Roth distribution after age 59.5 is not taxable: https://www.irs.gov/retirement-plans/re ... ccounts#21

There are further questions specific to rollovers: https://www.irs.gov/retirement-plans/re ... ccounts#27

Alan S.
Posts: 7794
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Roth 403b rmd question

Post by Alan S. » Fri Jul 13, 2018 2:53 pm

A traditional 403b to Roth IRA rollover must be completed by 12/31 for the taxable income to be reported in 2018. Amounts in such rollovers come out tax free right away, but are subject to the 10% penalty for the first 5 years counting the rollover year, or until 59.5 if sooner.

Your Roth IRA will be fully qualified and tax free when you reach 59.5, but much of it will be non taxable right away. For example, all your Roth 403b deferrals will be treated as regular Roth IRA contributions, and can come out without tax or penalty anytime. The earnings generated in either your Roth 403b or Roth IRA will not become tax and penalty free until 59.5 however.

Post Reply