Re: Withdrawing from Roth 401k

Discussion in 'Financial Planning' started by Default User, Dec 27, 2010.

  1. Default User

    Default User Guest

    Augustine wrote:

    > I intend to withdraw my 2010 contributions to a Roth 401k. What can I
    > expect in terms of difficulties doing it?


    What do you mean? The rules for a Roth 401(k) are different than a Roth
    IRA. There's no free withdrawal of contributions.


    Brian
     
    Default User, Dec 27, 2010
    #1
    1. Advertisements

  2. Default User

    Default User Guest

    Augustine wrote:

    > On Dec 27, 1:57 am, "Default User" <> wrote:
    > > What do you mean? The rules for a Roth 401(k) are different than a
    > > Roth IRA. There's no free withdrawal of contributions.

    >
    > I'm assuming that http://en.wikipedia.org/wiki/401(k)_IRA_matrix
    > is correct.


    It's not quite the way they indicate. The IRS lays out the rules here:

    <http://www.irs.gov/retirement/article/0,,id=152956,00.html#distns>


    It's not at all like a Roth IRA.




    Brian
    --
    Day 691 of the "no grouchy usenet posts" project.
    Current music playing: None.
     
    Default User, Dec 27, 2010
    #2
    1. Advertisements

  3. Default User

    Guest

    Augustine <> writes:

    > On Dec 27, 4:56 pm, "Default User" <> wrote:
    >> It's not quite the way they indicate. The IRS lays out the rules here:
    >>
    >> <http://www.irs.gov/retirement/article/0,,id=152956,00.html#distns>
    >>
    >> It's not at all like a Roth IRA.

    >
    > http://www.irs.gov/retirement/article/0,,id=152956,00.html#24 actually
    > confirms that unqualified distributions of the principal may be done
    > penalty and tax-free after 5 years, as Wikipedia stated. Or am I
    > missing something?


    My reading of it is that, unlike a Roth IRA, distributions are
    not "contributions first" but rather, more somewhat similar to
    Roth conversions, prorated.

    For example:

    Roth IRA - contribute $5000. It grows to $6000. You may now
    withdraw $5000 with zero tax or penalty consequences. If you
    take $5500, $500 of it will, if not qualified, be taxed and
    penalized.

    Roth 401(k) - contriubte $5000. It grows to $6000. Now if
    you take an unqualified distribution of any size, 5/6 of it
    is untaxed and no penalties, but 1/6 of it will be taxed and
    penalized. To return to the above example, if you now take
    a $5000 distribution, you don't get your $5000 contribution
    back but rather, you get $4166.67 tax/penalty free and you
    will pay taxes and penalties on $833.33.

    I sincerely hope someone will clarify for me wether this is
    or is not the case.

    And if it is the case, why wouldn't one just roll the money
    over to their Roth IRA and then take the distributions under
    those rules? (Assuming he or she has had a qualifying event
    which allows the rollover, such as leaving that employer).

    --
    Plain Bread alone for e-mail, thanks. The rest gets trashed.
     
    , Dec 28, 2010
    #3
    1. Advertisements

Want to reply to this thread or ask your own question?

It takes just 2 minutes to sign up (and it's free!). Just click the sign up button to choose a username and then you can ask your own questions on the forum.
Similar Threads
  1. Lori
    Replies:
    6
    Views:
    358
  2. Replies:
    0
    Views:
    343
  3. mike
    Replies:
    8
    Views:
    789
    rick++
    May 6, 2010
  4. dan

    Roth 401k vs. Roth IRA vs. 401k

    dan, Jan 8, 2007, in forum: Financial Planning
    Replies:
    8
    Views:
    451
    Will Trice
    Jan 11, 2007
  5. Gary

    Re: Withdrawing from Roth 401k

    Gary, Dec 26, 2010, in forum: Financial Planning
    Replies:
    0
    Views:
    630
Loading...

Share This Page