But now let's say you've only had your Roth IRA for three years. If you roll your Roth 401(k) into your Roth IRA, there's no problem. And in this case, it's the timing of the Roth IRA that counts.įor example, let's say you've had a Roth 401(k) for 10 years and you've also had a Roth IRA for five years. However, what most people might not realize is that when you rollover a Roth 401(k) to a Roth IRA, the clock is reset. ![]() The clock starts ticking January 1st of the year you make your first contribution. There's only one catch: To get this total tax-free benefit, either type of Roth account has to be open for five years. (Note that 401(k)s may have additional rules around withdrawals.) That can make a huge difference in your tax liability during retirement. One of the key benefits of a Roth IRA or Roth 401(k) is that, while contributions aren't tax-deductible, both contributions and earnings can be withdrawn tax and penalty free once you reach age 59½. With your money in a Roth IRA, rather than being required to take a certain amount out of your retirement savings each year, you can choose how much, when-or if ever-you want to make withdrawals.īut as you suggest, there are certain things you need to be aware of to make sure you can take full advantage of all the Roth IRA benefits. So the idea of rolling your Roth 401(k) money into a Roth IRA before that magic age makes a lot of sense. With a Roth 401(k)-unlike a Roth IRA-you must take a required minimum distribution (RMD) beginning at age 72 (for those born on or after July 1, 1949) if you’re retired. I think you're right on target with your basic idea. I rarely get questions regarding a Roth 401(k) rollover, but as this type of retirement plan becomes more widely available, I'm sure more and more people will be looking for similar answers. Two questions: Do I need to open a Roth IRA five years prior to the rollover to meet the 5-year rule? And can I contribute to a Roth IRA even though I max out my Roth 401(k)? I plan to roll the Roth 401(k) into a Roth IRA before 72 to avoid having to take an RMD. Right now I contribute the maximum to my Roth each year. I'm 56 and have both a traditional and a Roth 401(k).
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |