How to Avoid Required Distributions from a Roth 401(k)

Rolling a Roth 401(k) into a Roth IRA can eliminate required distributions for investors who want their money to continue to grow tax-free.

Question: I have a Roth 401(k) and a Roth IRA and was told that I must take required minimum distributions from the Roth 401(k). Is there any way to avoid that? - K.W., Woodstock, Va.

Answer: Yes, you can roll your Roth 401(k) balance tax-free into a Roth IRA, which does not have required minimum distributions once you turn 70½, as a Roth 401(k) does. You will have to complete the rollover before the year you turn 70½ to avoid an RMD, says Ed Slott, an IRA expert and founder of For example, if you turn 70½ in 2020, you would have to complete the rollover by the end of 2019.

However, if you’re already 70½, you’ll have to take an RMD for the year and then roll over the balance to the Roth IRA to avoid mandatory distributions on the money in the future. (Try our calculator to see when you need to take your first RMD.)

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A Roth 401(k) is a combination of a Roth IRA and a 401(k). As with the Roth IRA, money goes into the Roth 401(k) after taxes have been paid on it, and your principal and any earnings can be withdrawn tax-free in retirement.

But because a Roth 401(k) is an option within your employer’s 401(k), it also shares features with the retirement plan, such as contribution limits and RMDs. For example, you can divide your money between a Roth 401(k) and a traditional 401(k) any way you like, although your total contributions for 2019 are limited to $19,000, plus another $6,000 if you’re 50 or older. (That’s higher than the contribution limits for a Roth IRA, which are $6,000 in 2019 plus an extra $1,000 for workers 50 and older.) And though the Roth 401(k) and traditional 401(k) have mandatory withdrawals at age 70½, you won’t have to take RMDs — provided your plan permits — if you’re still working for the employer that sponsors the 401(k), Slott says. Once you leave the job, though, RMDs kick in. To avoid this, Slott suggests rolling over your Roth 401(k) into a Roth IRA before you retire.

By rolling your Roth 401(k) into a Roth IRA, you will avoid RMDs during your lifetime. And if your spouse inherits a Roth IRA, she can roll it over into her own Roth IRA and continue to avoid RMDs, Slott says. But if a child or other non-spouse inherits your Roth IRA, your heir will have mandatory — but tax-free — withdrawals, he says.

To give a non-spouse the most advantageous withdrawal schedule, make sure the heir’s name is listed on the IRA’s beneficiary form, Slott says. If so, your heir will be able to take withdrawals based on his or her life expectancy, which can be over decades. “The longer the money stays in there, the more it builds tax-free,” Slott says. If a non-spouse heir isn’t named as the beneficiary on the account, the Roth IRA balance must be drawn down within five years, starting the year after your death.

Eileen Ambrose
Senior Editor, Kiplinger's Personal Finance
Ambrose joined Kiplinger in June 2017 from AARP, where she was a writer and senior money editor for more than three years. Before that, she was a personal finance columnist and reporter at The Baltimore Sun, and a reporter and assistant business editor at The Indianapolis Star. Ambrose has a master's degree in journalism from the Medill School of Journalism at Northwestern University, and a bachelor's degree in art history from Indiana University.