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A Roth 401(k) is funded with post-tax money, unlike a traditional 401(k) made with pre-tax contributions. For a Roth 401(k), you can withdraw money without penalty or taxes if you’re at least ...
But you’ll owe ordinary income tax and a 10% penalty if you withdraw earnings (i.e. gains and dividends your investments made inside the account) from your Roth 401(k) prior to age 59 1/2.
The most notable benefit of the Roth 401(k) – and the one that experts love – is the ability to withdraw any money in the account tax-free at retirement age, which begins at age 59½.
Beginning in the 2006 tax year, employees have been allowed to designate contributions as a Roth 401(k) deferral. Similar to the provisions of a Roth IRA, these contributions are made on an after-tax basis. For accumulated after-tax contributions and earnings in a designated Roth account (Roth 401(k)), "qualified distributions" can be made tax ...
The same rules apply to a Roth 401(k), but only if the employer’s plan permits. In certain situations, a traditional IRA offers penalty-free withdrawals even when an employer-sponsored plan does ...
The Roth 401(k) program was originally set up to sunset after 2010, along with the rest of EGTRRA 2001. The Pension Protection Act of 2006 extended it. Until the end of 2022, owners of Roth 401(k) accounts (designated Roth accounts) must begin distributions at age 72, as with IRAs and other retirement plans. (Pub 4530)
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