If you are eligible to receive a distribution from your 401(k), 403(b), TSP or 457(b) retirement plan, you have option to directly rollover eligible rollover distributions from these plans to a Roth IRA (e.g., self-directed IRA LLC), or to a designated Roth account (e.g., self-directed Roth 401k) provided you are self-employed and your self-directed 401k plan allows for rollovers to designated Roth accounts.
Before you decide which type of account to choose, you should understand the differences.
Differences between Roth IRA and designated Roth Accounts
When you turn 70 ½ you will be required to take required minimum distributions from designated Roth accounts (e.g., self-directed 401k), nut not from Roth IRAs.
The rules do not permit the transfer of Roth IRAs to a Roth designated account like a self-directed Roth 401k; however, Roth designated accounts (e.g., Roth 401k) may be transferred to a Roth IRA. This method is commonly utilized to escape the RMD requirement. Therefore, make sure to transfer the Roth designated account to the Roth IRA before you reach age 70 ½ in order to avoid the required minimum distribution requirement.
Distribution Rules
Withdrawals from a Roth IRA or a designated Roth account, including earnings, will be tax-free if you:
Have held the account for at least 5 years, and
Are:
Age 59 ½ or older;
Disabled; or
Deceased.
In addition, you can get tax-free distribution after 5 years from a Roth IRA of up to $10,000 to buy your first home.
Before you decide which type of account to choose, you should understand the differences.
Differences between Roth IRA and designated Roth Accounts
When you turn 70 ½ you will be required to take required minimum distributions from designated Roth accounts (e.g., self-directed 401k), nut not from Roth IRAs.
The rules do not permit the transfer of Roth IRAs to a Roth designated account like a self-directed Roth 401k; however, Roth designated accounts (e.g., Roth 401k) may be transferred to a Roth IRA. This method is commonly utilized to escape the RMD requirement. Therefore, make sure to transfer the Roth designated account to the Roth IRA before you reach age 70 ½ in order to avoid the required minimum distribution requirement.
Distribution Rules
Withdrawals from a Roth IRA or a designated Roth account, including earnings, will be tax-free if you:
Have held the account for at least 5 years, and
Are:
Age 59 ½ or older;
Disabled; or
Deceased.
In addition, you can get tax-free distribution after 5 years from a Roth IRA of up to $10,000 to buy your first home.
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