Roth 401k to Roth IRA conversion questions

Say a person has contributed $100,000 to a Roth 401k, and at age 40, that person loses his or her job at the company that sponsored the Roth 401k. At the time of his termination, his or her Roth 401k balance is $250,000. ($100,000 from contributions, $150,000 from returns).

If that person rolls his entire Roth 401k balance into a Roth IRA:

  1. Are there any taxes due from the conversion itself?
  2. Can the $100,000 be immediately withdrawn as a contribution, or does it have to age 5 years as a rollover?
  3. After 5 years, can that person tap the full $250,000 converted without tax or penalty, or just the initial $100,000 that was made as an initial contribution to the Roth 401k?

Thanks so much in advance for your guidance.

Home Fool

Sorry, you need to be more clear on this. There are different ways that the employee can ‘contribute’ money to a Roth account in a 401(k), including:

  • designated Roth account contributions from their deferral limit (or if the person was older than 50, catch-up contributions)
  • conversions from Traditional account amounts, including employer matches
  • conversions from after-tax contributions (aka ‘mega back door’)

There is no conversion. It’s a rollover. Taxes are not due on rollovers.

Well, it’s a rollover, not a conversion. The 5 year clock applies to conversions. That said, the answer is maybe. It depends, at least in part, on exactly how the contributions got into the Roth 401(k) account, as mentioned above. If they were direct 401(k) contributions, then they can be withdrawn without waiting for 5 years. If they were conversions that were done in the 401(k), then they carry the conversion clock started in the 401(k) into the IRA with them, and conversions from each year would have to age for 5 years after the conversion occurred in the 401(k) before they could be withdrawn tax and penalty-free.

I will also mention that even if the Roth 401(k) was rolled into a separate Roth IRA account, the ordering rules for distributions will apply to all Roth IRA accounts owned by the same person. So regular Roth IRA contributions would be considered to be the first out, followed by rollovers. So if the person already had a Roth IRA account, all of the contributions for that would be taken out before starting to take out the $100k. You can see the ordering rules in IRS Pub 590-B 2022 Publication 590-B (

No. The additional $150k was and always will be considered to be earnings. Just like earnings on Roth IRA contributions, earnings from the Roth 401(k) are not eligible for tax and penalty-free withdrawal until the Roth IRA distributions are qualified. That would require:

  • The IRA owner to have had a Roth IRA account open and funded for at least 5 tax years; AND one of the following:
  • the owner is at least 59 1/2
  • the owner is disabled
  • be a distribution to a beneficiary after the death of the owner
  • meet the first time home buyer exception

I will point out that if someone wants to tap money from their Roth 401(k) in the type of circumstances that you describe, they should roll their Roth 401(k) into a Roth IRA before taking any distributions. That’s because Roth 401(k) distributions do not use the IRA ordering rules - all Roth 401(k) distributions are considered to be pro-rata withdrawals of both earnings and contributions, and therefore, would generate taxes and penalties on the earnings portion. That means that if there are $100k in direct 401(k) contributions (not conversions) and $150k in earnings, 60% of the distribution would be considered earnings and be subject to taxes and penalties.



If you need the funds before age 59-1/2, a 72t distribution might be possible. You can do that for an traditional IRA for sure. There are strict rules that limit your distributions.

Unlikely to be useful in the circumstance described.

First of all, 72(t) distributions require that withdrawals continue until age 59 1/2 or 5 years, whichever is LONGER. So a 40 year old would be committing to taking out at least 19 or 20 annual distributions (depending on when they turned 40) from their account.

Then, because of number of distributions, the distribution amount, even when considering the total account balance of $250k, is significantly less than $100k: For someone who is 40 years old, assuming their beneficiary is also 40, even with the maximum allowable interest rate of 4.98% (120% of April’s Federal Mid Term rate of 4.15%), the maximum allowable withdrawal is $14,150 using this calculator 72t Distribution Calculator (

Additionally, since this is a Roth 401(k), and when a Roth 401(k) is rolled over into a Roth IRA, allows you to take out original contributions, and any conversions that are at least 5 years old without having to pay taxes or penalties, 72(t) distributions don’t seem to fit the scenario described.

For someone who lost their job when they were within a few years of the year they turn 55, using 72(t) withdrawals on a Roth 401(k) might be a useful tool. If they have already reached the year they turn 55 when they lose their job, they should be able to access their Roth 401(k) using the rule of 55. But for someone who lost their job, but won’t be 55 for another 14 or 15 years, 72(t) just doesn’t seem like a useful tool.



Thanks so much!

Home Fool