Can I withdraw Roth 401K contributions penalty free after a rollover to Roth IRA?

Can I withdraw Roth 401K contributions penalty free after a rollover to Roth IRA?
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#1

Let’s say, for example, that I had a Roth 401K through a previous employer with $10K in contributions and $2K in earnings. I then roll that Roth 401K over to a Roth IRA account. If I withdraw $10K from the Roth IRA account, will I be penalized? How do you know whether or not you have been penalized on your tax return?

I have been reviewing the IRS site, particularly this chart, but I have not been able to find a definitive answer on whether or not Roth 401K contributions act similarly as Roth IRA contributions. Logic would tell me the answer is no, especially since my employer was matching my contributions.


#2

Hi, @jvonscha! I’ve asked the AICPA to find us someone who can answer your question. Hang tight–hoping to hear back tomorrow.


#3

Good news, @jvonscha: “When you roll over a Roth 401k to a Roth IRA, the portion that was contributions to the Roth 401k will be reported in Box 5 of the 1099R. This amount will be counted as basis in your Roth IRA, just like direct Roth IRA contributions, and therefore can be withdrawn anytime tax and penalty free. When you withdraw the money from your Roth IRA, you’ll need to file Form 8606 with your tax return and report the basis (amount of contributions) on Line 22.” – David Oransky, CPA/PFS member of the American Institute of CPAs’ Personal Financial Planning Executive Committee.

Thanks for asking the question–we all learned something new with that one!


#4

Great, thank you! I don’t plan on doing this, but I was curious… and it’s nice to know that I have the option if there is ever an investment opportunity I like for which I need more capital.