Roth 401(k) plans are presented by companies to employees as a way to deposit money to one side for retirement. Roth 401(k) accounts offer the benefits of being able to withdraw the amount at retirement and the amount is tax-free. Though, when you leave your current job, whether you are shifting on to a new job or you are retiring, you may be desperate to roll over current plan into a Roth IRA or into a plan at your new company. Even though, it is not sensible to tap retirement funds, in anxious times the unthinkable may become the only option.
Rolling over to Roth IRA Plans
If you want to roll over into a Roth IRA plan from the Roth 401(k) plan, then the total number of years the Roth 401(k) plan has been opened is not counted for the five-year requirement. For instance, if you open a new IRA plan and want to roll the money from your Roth 401(k), then you have to wait for five years before taking qualified distributions, even though you have the Roth 401(k) plan opened for six years. However, if you have opened the Roth IRA account for five years, then the rollover amount from the Roth 401(k) will satisfy the five-year requirement.
Rolling over to New Roth 401k Plans
If you are rolling the money from your old Roth 401(k)to one with your new employer, then the Internal Revenue Service (IRS) allows the number of years the old (previous) Roth 401(k) was opened to count toward a five-year requirement for the new account. According to the five-year requirement rule, the account must have been opened for at least five years and you must be at least 59 1/2 years old to take qualified distributions from your Roth 401(k) plan. For instance, if your previous Roth 401(k account has been opened for at least five years and you rolled over to a new Roth 401(k) account, then the new account satisfies the five-year requirement.