Roth 401k to Roth IRA Rollover with Employer Matching

Forum|Forum|1 year ago
December 29, 2024
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Hello, I am 35 years old and am trying to figure out my contribution basis for my Roth IRA which includes funds rolled over from both a Roth 401k and a regular 401k with employee contributions.

In 2021, I stopped working at a company and had accumulated the following accounts:

Roth 401k (post-tax): $10k personal contributions, $3k earnings and no employer match

Traditional 401k (pretax): $5k employer matching contributions, $2k earnings

Upon leaving the company in 2021, I rolled over the full $20k from both accounts to my Roth IRA, which was already opened and had been funded separately since 2017, and I paid income taxes on the $7k from the traditional 401k. Here are my questions:

1. How much of the $20k that I rolled into my Roth IRA can I withdraw today without paying the 10% penalty?

2. Does that amount change/increase in 2026 (5 years after the rollover), or is the 5-year rule irrelevant since the Roth IRA was first contributed to in 2017 (7 years ago)?

Thank you in advance.

Best answer by dmertz

1. $10k. The $10k of contribution basis in the Roth 401(k) account became contribution basis in your Roth IRAs and the $3k of earnings on that became earnings in your Roth IRAs.

2. Yes. The $7k that you rolled over from the traditional 401(k) account to the Roth IRA became Roth IRA conversion basis in 2021. As of January 1, 2026 that $7k will have completed the 5-year conversion clock, allowing that $7k to be distributed without penalty after the $10k of contribution basis has been distributed.

5-year conversion clocks are separate from the 5-year qualification clock. To be a qualified distribution from your Roth IRAs where the earnings are not longer subject to taxation, the 5-year qualification clock must be completed (which will have happened as of January 1, 2026) as well as you being age 59½ or over or disabled.

dmertzAnswer

Employee

1. $10k. The $10k of contribution basis in the Roth 401(k) account became contribution basis in your Roth IRAs and the $3k of earnings on that became earnings in your Roth IRAs.