5 year rule Roth 401k to Roth IRA

Hey @luke! You’ve reached the right place for your questions. When funds are rolled over from a Roth 401(k) to an existing Roth IRA, the rolled-over funds inherit the same timing as the Roth IRA. This means the aging period for the Roth IRA applies to the funds rolled over from the Roth 401(k) account. If you roll Roth 401(k) funds into a Roth IRA that have met the 5-year aging period, those rolled over funds have met the aging requirement. Once your 5-year aging requirement for your Roth IRA has been met, Roth 401(k) assets rolled into a Roth IRA are immediately considered to have met the 5-year aging requirement. Should you choose to withdraw money from your Roth IRA, it is important to be aware of the distribution ordering rules and what makes a qualified withdrawal. I’ll outline that below. Roth IRA distributions are based on the following ordering rules: 1. Annual Contributions- Can be withdrawn anytime tax and penalty-free for any reason. 2. Conversions- Can be withdrawn tax-free. A 10% penalty may apply if withdrawn within five years of the conversion. 3. Earnings- Income tax applies unless the withdrawal is qualified. There is also a 10% penalty unless an exception applies. If your Roth IRA withdrawal is qualified, the full balance is tax and penalty-free. To be qualified, a withdrawal must occur at least five years after January 1 of the year of your first Roth IRA contribution or conversion and must meet one of the following conditions: -Owner is at least 59 1/2. -Death of the owner. -Disability, as defined by the IRS. -Qualified first-time homebuyer expenses (up to a $10,000-lifetime limit).