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A Roth 401(k) is an employer-sponsored investment savings account that’s funded with after-tax money.

Its rollover options are similar to those for a traditional 401(k). You can roll the funds from a Roth 401(k) into an IRA, or you may be able to roll your old Roth 401(k) into one from a new employer.

To ensure a seamless transition for either option, send the funds from trustee to trustee. If you choose to have them sent to you in between instead, you have 60 days to distribute them to a Roth IRA.

The rules for taking distributions from the new 401(k) will vary by the plan itself. The original money contributed to a Roth IRA can be withdrawn at any time without taxes or penalty. But rules vary for the distributions of earnings from interest.

A qualified distribution from a Roth IRA is one that’s made after the account has been open for five years and the owner is at least 59 ½ years old; or after death or disability; or for a first-home purchase. If you roll over funds from an old Roth 401(k) to a new Roth 401(k), the years that the funds were in the old plan can count toward the five-year period for qualified distributions. Rollovers from a Roth 401(k) to an existing Roth IRA do not count the years in the previous plan toward the five-year period.                                            

It’s usually best to roll over a Roth 401(k) into a Roth IRA because the options in the IRA are typically better. It’s not a good idea to tap into retirement funds early, but the need for that money should be considered before rolling the money into an IRA.

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