Reply To: Question Regarding Five Year Rule for Roth IRA Withdrawals -Alan S. Please Help!

Home Fairmark Forum Retirement Savings and Benefits Question Regarding Five Year Rule for Roth IRA Withdrawals -Alan S. Please Help! Reply To: Question Regarding Five Year Rule for Roth IRA Withdrawals -Alan S. Please Help!

#1363
NeedSomeAdvice
Participant

Thanks Alan. I understand your uncertainty regarding my returns, but a few concentrated positions in NFLX & TSLA helped generate the outperformance.

Regarding your answer & to confirm, the $10,798 in earnings from the Roth 401k that were rolled into the Roth IRA can now be withdrawn tax-free and penalty-free since I have passed the five year period? The only reason I’m asking for more clarity is because other users are posting commentary from you in the past on Bogleheads that they interpret as implying otherwise:

“When a Roth 401k balance is rolled into a Roth IRA, the new balance in the Roth IRA shifts to Roth IRA accounting. A Roth IRA distribution then follows the Roth IRA ordering rules you are probably familiar with.

The amount of elective deferrals to the Roth 401k are shown in Box 5 of the 1099R for the Roth 401k rollover. That amount is added to your Roth IRA regular distribution balance and can come out tax and penalty free anytime. Earnings in the Roth 401k are treated as Roth IRA earnings, and they come out last subject to tax and penalty.”

It appears to me you can take (penalty free) $102,561* out of His Roth IRA and she can take $5,000 out of Her Roth IRA.

The earnings that occurred in the Roth 401k prior to rollover and the earnings that have occurred in His and Her Roth IRAs since the rollover are not available without tax and 10% penalty.

*Roth 401k = $48,125
Before Tax 401k = $19,760
Company Match = $26,869
Supplemental = $2,807
Direct contribution $5,000
$102,561

+ Direct contribution to Her Roth IRA of $5,000

Thanks again for your time and help. I really appreciate it.

Best,
Adam