Roth 401k contributions

[Guest Wedge1]

I have designated a portion of my paycheck to go into a Roth 401K account. This option became available only recently through my employer and to my understanding, it is an option available that is not quite as ubiquitous at the "normal" 401K, i.e, not every major company necessarily has the Roth 401K option, though a traditional 401K is available within most major corporations.

My question has to do with switching jobs. What if I find myself taking a job with a different company at some point in the future and they do not have a designated Roth 401K contribution system in place as my previous employer did? Conversely, what if my new employer DOES have a Roth 401K contribution system in place?

Without getting me too confused, I'm just wondering if my money and it's earnings will somehow lose the privledge of non-taxation, say, by being rolled into a normal 401K plan of the new employer should they not have a Roth 401K option. What must I do in order to ensure that the money contributed to my current Roth 401K plan and its earnings remain tax-free should I change jobs?

[Tom Poje]

without digging through my notes, and relying on my memory

you can only rollover Roth $ to another Roth style account, so you would never lose your tax free distribution (unless you withdrew the $ early, of course) well, of course mistakes do happen and I suppose one could accidently roll roth $ into another type of account - just make sure that doesn't happen.

now, if your new plan doesn't have the Roth option, you can always roll the roth $ into a roth IRA. The new roth regs just came out a day or 2 ago. If I recall, if you roll the $ into a roth IRA it starts the 5 year clock running all over again.

sorry, I don't work much with Roth $ so I don't keep up on it in great detail.

[Guest Wedge1]

I was kind of assuming that it would remain tax-free somehow, but I wanted to be sure. I don't plan on changing jobs any time soon. But I am hoping that as time goes by, the Roth 401K will become commonplace like the traditional 401K, and that one can just take the Roth 401K with them wherever they find employment.

[Guest Guest_IBlameTedBenna_*]

As Tom explained, the receiving plan of the new employer must also have the Roth 401(k) option in order to do a direct rollover. And if you roll to a Roth IRA, the 5 year clock starts ticking anew in the Roth IRA. It's a good idea to establish & fund a Roth IRA in advance to get the 5 year clock ticking in case you do roll Roth 401(k) money into the Roth IRA. Also, if you are normally excluded from establishing a Roth IRA because of income limits, the IRS will allow you to establish a Roth IRA for the purpose of rolling over Roth 401(k) monies.

If you have 2 separate Roth 401(k) plans, you will have 2 separate 5 year start dates. But the final regs state that if you roll one Roth 401(k) account (Plan A) with an earlier 5 year start date into the receiving Roth 401(k) plan (Plan B), you can use that 5 year start date of Plan A to apply to all Roth contributions in Plan B (and vice-versa if Plan B has the earlier start date).