Question

nonqualified ROTH vs non

Forum|Forum|5 years ago
November 7, 2020
2 replies
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I'm 60 and retired. I've had a E*Trade ROTH for 10 yrs. In my company 401K I've converted some fund to the ROTH side. I would like to move the ROTH funds to the E*Trade ROTH but they say it is unqualified for 3 or 4 yrs depending on when the conversion was done. Well, the 3 yrs was after tax funds 4 years for conversion.

I will be doing more conversion to a desired amount before RMDs happen.

Are any new conversion qualified after the 4 yr time frame?

Why can't I move the funds to my fund to a qualified ROTH?

macuser_22

Employee

@rathail wrote:

I'm 60 and retired. I've had a E*Trade ROTH for 10 yrs. In my company 401K I've converted some fund to the ROTH side. I would like to move the ROTH funds to the E*Trade ROTH but they say it is unqualified for 3 or 4 yrs depending on when the conversion was done. Well, the 3 yrs was after tax funds 4 years for conversion.

I will be doing more conversion to a desired amount before RMDs happen.

Are any new conversion qualified after the 4 yr time frame?

Why can't I move the funds to my fund to a qualified ROTH?

You are confusing several things:

1) Each conversion has it's own 5 year waiting period before the "earnings" can be withdrawn without a 10% penalty. There is no restriction on removing your own prior contributions. However, being over age 59 1/2 makes the 5 year rule a moot point because being over 59 1/2 is an automatic exception to the penalty.

2) "Moving" the Roth to another financial institution is not a distribution subject to the 5 year rule, it is a rollover that can always be done. You would simply have the 401(K) Roth trustee do direst rollover to your Roth IRA and you never see the money.

3) Roth accounts (other than inherited Roth's) do not have a RMD, only Traditional 401(k) plans and Traditional IRA's have a RMD.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

R

rathailAuthor

Thanks,

What you are stating is what I understand to be true. But the 401K admin is stating I can't roll my 401K-ROTH funds until qualified, 4 more years. and then 5 years after each conversion.

My understanding as far as the RMD for 401K-ROTH goes if I leave the funds in they are subject to RMD distribution at, currently 72. If I move them out no RMDs.

Critter-3

The 401K administrator have rules they must follow ... so if you are still employed there you may not have a choice in the matter. Seek assistance with this matter ... talk to the ROTH administrator on how to proceed.

Critter-3

They can allow the rollover however they are correct there are ordering rules for distributions from the account. The record of the conversion from the 401K to the ROTH 401K then subsequent roll to a ROTH must be kept so when the withdrawals happen they can be dealt with correctly.

https://www.irs.gov/publications/p590b