Reply To: Rule of 55 for Roth 430b

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Alan S.

You can. The age 55 exception is not limited by account, and will waive the 10% penalty on taxable earnings or on in plan Roth rollovers done less than 5 years back. The main issue with this exception is that the benefit is lost if the plan does not offer flexible partial distributions after separation. Some plans only offer lump sum distributions. Receiving a lump sum will in most cases spike your tax rate and that will offset much of the benefit of not having to pay the 10% early withdrawal penalty. If you pre tax 403b allows partial distributions, the Roth should follow suit. Since a designated Roth must distribute earnings pro rated with basis, to the extent you have earnings in the account or in plan Roth rollovers, the penalty on those should be waived as coded on your 1099R Box 7. If Box 7 is not coded correctly, you can override the 1099R by filing Form 5329 to claim the exception.

Here is the IRS penalty exception chart. Note that the the age 55 applies to all qualified plans:

  • This reply was modified 1 year, 5 months ago by Alan S..