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Learning, Sharing, and Teaching => Investor Alley => Topic started by: The Mobile Mustachian on November 29, 2014, 01:04:09 PM

Title: Solo Roth 401K Distributions - How Can this Be Done Before 59 1/2?
Post by: The Mobile Mustachian on November 29, 2014, 01:04:09 PM

Hello everyone,

Next year, I'm planning on starting a new LLC to provide liability protection for a side business that I have been building. I've been considering signing up for a Solo Roth 401K through Vanguard for my wife and I which we can use to shelter some of the income being generated. I'd appreciate your advice on how best to access these funds when we get closer to our FIRE date which is about 9 year away.

My understanding is that Roth IRA contributions can be withdrawn at any time, but earnings cannot be withdrawn until 59 1/2. The same holds true for the Solo Roth 401k. How can I access these funds since we will still be well below this age? Is there a way to roll over the funds to a Roth IRA in such a way that the funds can be withdrawn and used?

Thanks for your time and assistance.

Title: Re: Solo Roth 401K Distributions - How Can this Be Done Before 59 1/2?
Post by: DavidAnnArbor on November 29, 2014, 02:12:53 PM

I think from what you're saying you will be able to withdraw part of your Solo Roth 401k - the part you contributed - without tax penalty, as you would with a regular Roth IRA.

Yes you can roll over your Solo Roth 401k to your Roth IRA without any tax consequences.  I don't know whether this will then help you avoid tax penalties on distributions of earnings from your Roth IRA that were rolled over from your Solo Roth 401k when you're age 54 as a way to dodge the 59.5 age requirement.

I've enclosed a rollover chart from IRS website