Roth conversion in 401k then Roth 401k to Roth Ira rollover - when can you withdrawal? and with what penalties/fees?

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Soon2BXProgrammer
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Roth conversion in 401k then Roth 401k to Roth Ira rollover - when can you withdrawal? and with what penalties/fees?

Post by Soon2BXProgrammer » Fri Oct 19, 2018 9:11 am

At this point i'm still working, but have the opportunity to do some Roth conversions of my significantly large pretax 401k, at a lower rate then i contributed to the 401k at. (think part time work, or spouse unemployed).

What are the seasoning rules/ordering rules about when (before retirement age) one can take a "withdrawal" (before full retirement age) from it or a rollover to roth ira after i quit?

(on my megabackdoor roth ira, i know that each conversion has to be seasoned 5 years, to be eligible for a return on contribution on both the basis and any gains at the time of conversion)

effectively, i'm trying to figure out how/when i can access the 401k roth conversion. from a tax situation, it makes sense to pay some taxes and do a conversion now while still working.

edit: i found this post, but it is not entirely clear:

https://forum.mrmoneymustache.com/inves ... msg1843455

edit also found:

https://fairmark.com/retirement/roth-ac ... -accounts/

Effectively, does this mean.. when a rollover from a Roth 401k occurs, the sum of contribution and conversions in the roth 401k, are immediately counted as contributions in the roth ira (and eligible for immediate return of contributions). any Roth 401k gains that are rolled over are effectively counted as roth ira gains and fall under that treatment ( wait till 59.5 or pay taxes&penalty) ?

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Earl Lemongrab
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Re: Roth conversion in 401k then Roth 401k to Roth Ira rollover - when can you withdrawal? and with what penalties/fees?

Post by Earl Lemongrab » Fri Oct 19, 2018 2:22 pm

Employee deferrals (pretax contributions) or Roth contributions can't be rolled over until you are age 59-1/2 (requires plan support) or you leave the employer. It doesn't matter if you convert those to Roth or not. Employer contributions can be rolled over at any time if the plan allows.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

Soon2BXProgrammer
Posts: 488
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Re: Roth conversion in 401k then Roth 401k to Roth Ira rollover - when can you withdrawal? and with what penalties/fees?

Post by Soon2BXProgrammer » Fri Oct 19, 2018 3:08 pm

Earl Lemongrab wrote:
Fri Oct 19, 2018 2:22 pm
Employee deferrals (pretax contributions) or Roth contributions can't be rolled over until you are age 59-1/2 (requires plan support) or you leave the employer. It doesn't matter if you convert those to Roth or not. Employer contributions can be rolled over at any time if the plan allows.
Understood. i want to understand after i leave my employer what are the rules to access roth 401k funds. What are my options. roll to an IRA, then what? what are the rules.

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FiveK
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Re: Roth conversion in 401k then Roth 401k to Roth Ira rollover - when can you withdrawal? and with what penalties/fees?

Post by FiveK » Fri Oct 19, 2018 3:39 pm

Soon2BXProgrammer wrote:
Fri Oct 19, 2018 3:08 pm
i want to understand after i leave my employer what are the rules to access roth 401k funds. What are my options. roll to an IRA, then what? what are the rules.
In short, all Roth 401k contributions become treated as Roth IRA contributions when a Roth 401k is rolled over to a Roth IRA, and Roth 401k earnings are treated as Roth IRA earnings.

Tax treatment of Roth IRA withdrawals with Roth 401k rollover has more info.

Soon2BXProgrammer
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Re: Roth conversion in 401k then Roth 401k to Roth Ira rollover - when can you withdrawal? and with what penalties/fees?

Post by Soon2BXProgrammer » Fri Oct 19, 2018 3:44 pm

FiveK wrote:
Fri Oct 19, 2018 3:39 pm
Soon2BXProgrammer wrote:
Fri Oct 19, 2018 3:08 pm
i want to understand after i leave my employer what are the rules to access roth 401k funds. What are my options. roll to an IRA, then what? what are the rules.
In short, all Roth 401k contributions become treated as Roth IRA contributions when a Roth 401k is rolled over to a Roth IRA, and Roth 401k earnings are treated as Roth IRA earnings.

Tax treatment of Roth IRA withdrawals with Roth 401k rollover has more info.
Thanks.. i'm actually going to do a in plan Roth conversion inside the 410k. so does everything i pay taxes (contributions and gains) on the conversion count as my "contributions" and then only the gains after that count as earnings when i roll it to the roth ira?

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FiveK
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Re: Roth conversion in 401k then Roth 401k to Roth Ira rollover - when can you withdrawal? and with what penalties/fees?

Post by FiveK » Fri Oct 19, 2018 4:05 pm

Soon2BXProgrammer wrote:
Fri Oct 19, 2018 3:44 pm
FiveK wrote:
Fri Oct 19, 2018 3:39 pm
Soon2BXProgrammer wrote:
Fri Oct 19, 2018 3:08 pm
i want to understand after i leave my employer what are the rules to access roth 401k funds. What are my options. roll to an IRA, then what? what are the rules.
In short, all Roth 401k contributions become treated as Roth IRA contributions when a Roth 401k is rolled over to a Roth IRA, and Roth 401k earnings are treated as Roth IRA earnings.

Tax treatment of Roth IRA withdrawals with Roth 401k rollover has more info.
Thanks.. i'm actually going to do a in plan Roth conversion inside the 410k. so does everything i pay taxes (contributions and gains) on the conversion count as my "contributions" and then only the gains after that count as earnings when i roll it to the roth ira?
See the linked thread for more, but "Note that if the employee did an in plan Roth rollover (IRR) before rolling to the Roth IRA, the tracking of Roth IRA basis becomes more complex prior to 59.5 because the taxable portion of each IRR must meet a 5 year requirement before it can be distributed without penalty. More simply, you track it as if you did an ordinary Roth IRA conversion in that same year."

Soon2BXProgrammer
Posts: 488
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Re: Roth conversion in 401k then Roth 401k to Roth Ira rollover - when can you withdrawal? and with what penalties/fees?

Post by Soon2BXProgrammer » Fri Oct 19, 2018 4:38 pm

FiveK wrote:
Fri Oct 19, 2018 4:05 pm
See the linked thread for more, but "Note that if the employee did an in plan Roth rollover (IRR) before rolling to the Roth IRA, the tracking of Roth IRA basis becomes more complex prior to 59.5 because the taxable portion of each IRR must meet a 5 year requirement before it can be distributed without penalty. More simply, you track it as if you did an ordinary Roth IRA conversion in that same year."
thanks for your patience.

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