One could envision loading both either a 401(k) or 403(b) and a 457(b) while working, retire early, and then establish a Roth conversion ladder with 401(k) or 403(b) funds while living of 457(b) funds – which can be withdrawn at any age penalty free – for the 5 years that it takes for the Roth funds to become available tax free. Roth IRA withdrawal and penalty rules vary depending on your age and how long you've had the account and other factors. What I did find was this chart from the irs showing that nonqualified distributions from a Roth 401k are pro-rated between contributions and earnings.. Before Roth 401(k)s became available, many investors had a traditional 401(k) at work and a Roth IRA too. If you can’t do a Roth 401(k) at work, this is what I recommend. The Roth 401(k) was introduced in 2006 and was designed to combine features from the traditional 401(k) and the Roth IRA. To make the process a little clearer, consider the basic rules surrounding Traditional and Roth IRA distributions. I spent some time searching, and couldn't find the answer written explicitly in IRS regulations. The withdrawal's taxes and penalties break down to 20% for federal taxes, 7% for state taxes, and a 10% early withdrawal penalty, for a total of 37%. Code H: Direct rollover of a designated Roth account distribution to a Roth IRA. Withdraw the least tax-efficient accounts first and the most tax-efficient accounts last. A qualified distribution is one that occurs at least five years after the year of the employee’s first designated Roth contribution (counting the first year as part of the five) and is made: On or after attainment of age 59½, On account of the employee’s disability, or On or after the employee’s death. A 401(k) loan or an early withdrawal? The “4% rule” is actually the “4.5% rule”- I modified it some years ago on the basis of new research. Ideally, you should contribute the maximum to both your 401k and Roth IRA. The 4.5% is the percentage you could “safely” withdraw from a tax-advantaged portfolio (like an IRA, Roth IRA, or 401(k)) the first year of retirement, with the expectation you would live for 30 years in retirement. Among other things, the CARES Act eliminates the 10 percent early withdrawal penalty if you are under the age of 59 ½. 1 (Early Distribution) 4 (Death) B (Designated Roth) If the pandemic has had negative effects on your finances, temporary changes to the rules under the CARES Act may give you more flexibility to make an emergency withdrawal from tax-deferred retirement accounts during 2020. There are also short-term effects from making an early withdrawal from your 401(k) as well: It doesn't come free. Roth contributions You may hold a retirement plan that allows Roth contributions, which are made with after-tax money. You can face tax penalties of 10% to 50% if you don't understand and follow these 401(k) withdrawal rules. This converts the money into Roth money. Note that this 5-year rule is on a per-Roth-401(k) basis. As well as diversifying stocks, it is possible to diversify strategies, such as for example 20% dividend stocks, 75% expansion, and 5% speculation, and adjust Keep in mind, though, not to treat any type of 401(k) like an ATM. Use for deemed distributions. For example, there are rules that dictate the timing of distributions, which distributions are taxed, and which ones are subject to a penalty. The goal is that by the time you hit 50 — early retirement age — you can withdraw $25,000 from the Roth account without incurring any early-retirement penalty. A unique fact that only applies to Roth 401(k)s is that, beginning at age 70.5, you must take required minimum distributions (RMDs) from your account. Retirement accounts, including 401(k) plans, are designed to help people save for retirement. Rolling over a Roth 401(k) to a Roth IRA can make sense in the right circumstances, but you need to be aware of the rules. A Roth 401(k) is a defined contribution retirement plan funded by after-tax dollars. You can withdraw money from those accounts tax free as long as you take the money at least 5 years after January 1 of the year in which you first contributed to that plan, and you are either age 59 ½ or older, or considered disabled. Traditional IRAs impose a 10% penalty for withdrawals of contributions and earnings made before age 59.5. Before making a Roth IRA withdrawal, keep in mind the following guidelines, to avoid a potential 10% early withdrawal penalty: Withdrawals must be taken after age 59½. Roth 401(k) plans offer after-tax savings, which means money in the account grows tax-free and qualified withdrawals can be taken tax-free. This is similar to a traditional 401(k) or IRA. 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