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Posted

Client asked this and I'm hoping for someone to confirm my findings.

Beneficaries of a Roth 401k are subject to the 5-year rule based on the decedent's first deposit year. Non-Spouse Beneficaries of a Roth 401k must withdrawal the funds within 10 years. 

Assume a participant converted funds in 2022, then passed away in 2023. The Beneficiary could make tax-free withdrawals beginning 1/1/2027, and the entire account must be distributed by 12/31/2028. 

In other words, I'm hoping to confirm that a beneficiary may only have a 5-6 year window for tax-free withdrawals in this example. OR, is the 5-year rule eliminated for beneficiaries?

R. Alexander

  • 2 weeks later...
Posted

Just for posterity's sake, 401king, "12/31/2023" should be "12/31/2028," right? You might want to edit your original post.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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