5 Year Rule and Roth IRA roll over

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David Alan

• March 01, 2023 01:44

I've searched for answers to these all over and can't find a clear answer. Hopefully someone here can help.

I am over 59 and half. I have a Roth IRA that is older than 5 years. I have after-tax contributions in my 401k with associated gains, example $90 contributions with $10 gains.

I’ve confirmed I can roll-over (in one transaction) the $90 after-tax value to my Roth IRA (tax-free) and the $10 gains into a traditional IRA (the gains, also tax free).

1. Since the money going into the Roth IRA was post-tax contributions, can I withdraw it anytime without waiting 5 years from the roll-over without taxes?
2. Can I withdraw any gains subsequently generated from the roll-over funds anytime without waiting 5 years from the roll-over without taxes?

I just created (in 2023) a Roth 401k (R401k) in my 401k account, clearly not 5 years old yet. I have confirmed that if I roll the $100 above into the R401k (within same plan), there would be a taxable event on the $10 gains since the total $100 would be rolled into the R401k. They can’t split them out.

1. If I subsequently then roll-over the $100 from the R401k into my Roth IRA, it will contain both contributions and gains, but will have no tax consequence, correct?
2. Once in the Roth IRA, can I withdraw the $90 contribution anytime without tax?
3. Can I withdraw the $10 gains from the roll-over funds anytime without waiting 5 years from the roll-over without taxes?
4. Can I withdraw any gains subsequently generated from the roll-over funds anytime without waiting 5 years from the roll-over without taxes?

Do roll-over funds have any impact on the annual contribution limits there are to Roth/Traditional IRAs? In other words, do they count toward those contribution limits?

TIA

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• Official comment

  

  Victor D

  • March 01, 2023 18:27

  Hi David -

   

  Thanks for reaching out to NerdWallet's support team! 

  
  
  While we aren't able to offer personalized financial advice, these resources should point you in the right direction:

   

  • Roth IRA Contribution and Income Limits 2022 and 2023
  • How Much Can I Contribute to My IRA - NerdWallet
  • Roth IRA Rules 2022 and 2023: Contributions, Withdrawals

   

  If you still can't find the answer to your question, you may want to consult with an accountant or other professional who is familiar with tax laws and retirement accounts. 

   

  Best Regards,

   

  Victor

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  David Alan

  • March 01, 2023 18:39

  Victor, thanks for the quick response. But to be clear, I am not asking for advice on what to do, I am asking for clarification of the rules for roll-overs.
  Thanks, David

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