Hi All- I've done a couple google searches and can't seem to find a clear answer on the complexities of a 401(k) rollover to IRA(s) that have both Roth and Traditional contributions. Here's my question:
With the understanding that Roth 401(k) contributions can be withdrawn tax and penalty free (pending the account is >5 years old), do those contributions retain that ‘Roth contribution’ status if they are rolled into a Roth IRA, or are they considered a ‘Roth Conversion’ and subject to a 5 year waiting period before they can be withdrawn penalty free? For example, if I have a company sponsored 401(k) with the following classifications:
1) After Tax Roth Contributions - $25,000
2) Roth Earnings - $5,000
3) Before Tax Contributions - $25,000
4) Before Tax Earnings - $5,000
5) Company Match $10,000
Is it possible to roll this account into separate IRAs?
A) Roth Items (1 & 2) into Roth IRA
B) Before Tax items (3, 4 & 5) into Traditional IRA
If that is possible, would item 1 be eligible for immediate withdrawal penalty and tax free (assuming the Roth IRA is >5 years old)? Or would it be treated as a conversion and thus subject to a 5 year waiting period before it can be withdrawn penalty and tax free?
Your question for me might be "Why would you do this? Just leave it in the account that it's in and just withdraw the Roth contributions." The reason I'm considering this is because these funds are in a employer sponsored 401(k) with poor investment options.
Any advice or answers would be helpful!
