A Roth 401(k) With $300,000 in It at 73 Owes No Required Distribution. Under the Old Rules, the Same Account Would Have

A designated Roth account in a workplace 401(k), 403(b), or governmental 457(b) plan holding $300,000 at age 73 has no required minimum distributions while the owner is alive. Some savers may even assume the older withdrawal rule still applies. The key questions are when the rule changed, whether rolling the money into an IRA makes sense, and which balances still require withdrawals.

When the Rule Changed and Who Got Caught in the Hand-Off

The SECURE 2.0 Act of 2022 removed the pre-death RMD requirement for Roth 401(k) and 403(b) accounts, effective for taxable years beginning after December 31, 2023. IRS Publication 560 now states that lifetime distribution rules do not apply to amounts in a designated Roth account, with distributions required only after the participant’s death.

One exception applied: the relief didn’t apply to taxpayers who had to take their first RMD in 2023 and elected to receive it by April 1, 2024. Retirees reaching RMD age in 2023 still had to take the 2023 payment in early 2024.

Why Workplace Roth Money Used to Get Rolled Out

Roth IRAs have never required withdrawals from the original owner, as IRS Publication 590-B clearly states. Workplace Roth accounts did require them, even though they held the same after-tax money. The usual fix was a rollover, and IRS rules let a designated Roth distribution move to another designated Roth account or to a Roth IRA. Under the old rules, that $300,000 account would have had to pay out a portion every year starting at 73. The amount came from dividing the balance by a life expectancy factor. Starting in 2024, nobody needs to roll over just to dodge those withdrawals.

Staying in the Plan Versus Rolling Into a Roth IRA

Leaving money in the plan keeps it under federal pension law. 401(k) plans generally get stronger federal protection under ERISA, while IRAs have varying state-level protections, and ERISA coverage generally ends once assets are rolled to an IRA. Large plans often offer institutional share classes unavailable to retail investors and may allow loans, which IRAs don’t. Someone who leaves a job in or after the year they reach age 55 can take penalty-free withdrawals from a qualified plan, an exception the IRS limits to plans other than an IRA.

Rolling out offers a wider investment menu and potentially lower fees. Consolidating several old plans into one Roth IRA simplifies beneficiary paperwork for heirs.

Staying makes more sense for people between 55 and 59½ who might need penalty-free access, worry about lawsuits, or have a plan with cheap institutional funds. Rolling over typically fits people past 59½ with a seasoned Roth IRA, who manage multiple old plans, or who are stuck with expensive options.

Five-Year Clock That Decides Whether a Rollover Stays Tax-Free

A qualified, tax-free Roth withdrawal requires age 59 1/2 plus a five-year holding period. Inside a plan, the clock starts in the first tax year you contribute to the Roth account. If you open your first Roth IRA with a rollover, a new five-year period begins, regardless of how long the money sat in the 401(k).

An existing Roth IRA changes the calculation. If it already met the five-year test, rolled-over money becomes qualified regardless of whether you met the five-year requirement in your employer plan. A small Roth IRA contribution made years before any rollover can be valuable, starting early so it can later protect the entire workplace balance.

Balances That Still Face Required Withdrawals

Pre-tax money remains subject to RMDs. In a plan holding both types, the IRS defines a participant’s “entire interest” for RMD purposes to not include amounts in a designated Roth account. The IRS calculates required withdrawals based only on the traditional balance.

Heirs of Roth account owners face a different set of distribution rules. The IRS says RMD rules do apply to the beneficiaries of Roth IRAs and Designated Roth accounts. Many non-spouse beneficiaries must empty the account by the 10th calendar year following the year of the account owner’s death. Once the five-year test is met, withdrawals are generally tax-free, giving the owner three options: let it compound, spend it last, or leave heirs a decade of tax-free withdrawals.

Two Items Worth Confirming Before Year-End

First, confirm whether the plan follows the current rule. Any Roth-portion withdrawal forced since 2024 signals an administrative error worth raising with the plan administrator, and second, verify the Roth IRA clock’s start date: the tax year of the first contribution to any Roth IRA. These two dates determine whether the workplace Roth can sit untouched and whether a later rollover comes out tax-free.

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