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Previous employer closed retirement acct. Received dist check for Roth 401k. What would be the penalty for keeping the money instead of rolling over to Roth IRA?

Forum|Forum|6 years ago
June 1, 2019
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My previous employer closed all of their retirement accounts. I received a distribution check for my Roth 401k. I didn't realize that there was a check in the envelope; just assumed it was another monthly statement. I missed the 60 day window to rollover without penalty.

If I decided to keep the money and not roll it into a Roth IRA, what would my penalty be? I've had the plan for more than five years, but I'm under 50yrs old.

Best answer by TaxGuyBill

You will pay regular income taxes and a 10% penalty on the amount OVER what you contributed.

For example, if you contributed $10,000 to your Roth 401k and it is now worth $15,000, you will pay regular income taxes (often 25%, plus State, but it depends on your income) and the 10% penalty on the 'extra' $5000.

As a side note, you say "if I decided to keep the money". If you missed the 60 day window, it can not be rolled over. However, because you did not yet cash the check, it *MIGHT* not be considered closed or withdrawn yet (you would need to contact the administrators of the 401k to determine that).

T

TaxGuyBillAnswer

You will pay regular income taxes and a 10% penalty on the amount OVER what you contributed.

For example, if you contributed $10,000 to your Roth 401k and it is now worth $15,000, you will pay regular income taxes (often 25%, plus State, but it depends on your income) and the 10% penalty on the 'extra' $5000.

As a side note, you say "if I decided to keep the money". If you missed the 60 day window, it can not be rolled over. However, because you did not yet cash the check, it *MIGHT* not be considered closed or withdrawn yet (you would need to contact the administrators of the 401k to determine that).