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The Curious Bag
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A Roth 401k is a retirement account that allows you to withdraw money tax free at retirement. In order to be qualified, withdrawals must meet both time in the account and age restrictions.
Time Frame
The Roth 401k account must be open for at least five years before you can take a qualified withdrawal from a Roth 401k.
Age
You must be at least 59 1/2 years old in order to qualify for a qualified withdrawal. If you leave your job and you are age 55 or older, you can take qualified withdrawals.
Considerations
If you become permanently disabled, you can take qualified withdrawals from your Roth 401k. In addition, if you die, your beneficiaries can take tax-free withdrawals.
Penalties
If you take an unqualified withdrawal, you must pay taxes and a 10 percent penalty on the percentage of your withdrawal that comes from the earnings on the money. The portion that comes from contributions is tax and penalty free.
Calculations
The amount of your distribution that comes from contributions and the amount that comes from earnings depends on the makeup of your Roth 401k. For example, if you have $13,000 in contributions and $7,000 in earnings in your Roth 401k, 65 percent of your withdrawal would be from contributions and 35 percent would be from earnings.
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