Can You Roll Over a Roth 401(k) to a Roth IRA: Steps and Taxes

Rolling over a Roth 401(k) to a Roth IRA is permitted under federal tax law, and if you handle it as a direct rollover, no tax is due on the transfer.¹ The move is common after leaving a job, and people usually do it to open up investment choices or consolidate accounts. Before you sign the paperwork, though, watch three things: the Roth IRA five-year clock, what happens to any employer match, and a penalty exception you give up once the money leaves the plan.

When You Can Do the Rollover

Federal law allows a designated Roth account to move to only two places: another designated Roth account in an employer plan, or a Roth IRA belonging to the same person.¹ In practice, you become eligible after a triggering event, usually leaving the employer through retirement, resignation, or layoff. Some plans also permit an in-service distribution once you reach age 59½, which lets you roll funds out while still employed.² Whether your plan allows this depends on its terms, so check with the benefits office before assuming you can move money early.

Income does not block the rollover. Regular Roth IRA contributions phase out at higher incomes, but rolling a Roth 401(k) into a Roth IRA is not subject to those caps. Any income level, any balance. The rollover also does not count against your annual IRA contribution limit.³

The Five-Year Clock Resets

This is the mistake most people make. The years your money spent in the Roth 401(k) do not carry over to the Roth IRA’s five-year clock for qualified, tax-free distributions.² The Roth IRA clock runs from the first tax year you made any Roth IRA contribution, not from the year of the rollover.

So if you already own a Roth IRA and your first contribution was more than five years ago, the rolled-over funds are immediately eligible for qualified withdrawal (once you also hit 59½).² If you have never owned a Roth IRA, the clock starts in the year the rollover lands, and you will need to wait the full five years before earnings qualify for tax-free treatment. A practical workaround: open a Roth IRA now and put in a small contribution. That starts the clock even if the rollover is years away.

What Happens to Employer Matching Money

Your own Roth 401(k) contributions were made with after-tax dollars, but employer matching contributions were traditionally deposited into a separate pre-tax account inside the plan.² That pre-tax money cannot land in a Roth IRA without tax. You have two options:

Send the match to a traditional IRA. No immediate tax bill. You can convert later, but the converted amount is taxed as ordinary income in the year of conversion.
Send the match directly to a Roth IRA. Allowed, but you owe income tax on the full amount in the year of the rollover because those dollars were never taxed.

The SECURE 2.0 Act changed one thing here. Under Section 604, employers may allow employees to designate matching contributions as Roth (after-tax) contributions.⁴ If your plan adopted the option and you elected Roth treatment for your match, that money rolls into a Roth IRA with no additional tax. The feature is optional for plans, so not every employer offers it.

Direct Rollover or 60-Day Rollover

How you move the money matters. A direct rollover keeps you clean; the 60-day route brings withholding and a deadline.

Direct Rollover

The plan administrator sends the funds straight to the Roth IRA custodian, either by wire or by a check made payable to the new institution for your benefit. Nothing is withheld and no deadline runs against you.⁵ Sometimes the plan mails that check to your home for you to forward. As long as the payee line names the new custodian, it still counts as a direct rollover.

Indirect (60-Day) Rollover

If the distribution is paid to you, the plan must withhold 20% for federal income tax, even if you intend to redeposit everything.⁶ From the day you receive the money, you have 60 days to deposit it into a Roth IRA.⁵ To replace the full original balance, you need to cover the withheld 20% out of pocket. Anything not redeposited within 60 days can be treated as a taxable distribution and may trigger a 10% early withdrawal penalty if you are under 59½.

The once-per-year rollover limit that restricts IRA-to-IRA transfers does not apply to a rollover from an employer plan to an IRA.⁵

Steps to Complete the Rollover

Open the receiving Roth IRA if you do not already have one. You will need the account number and the custodian’s mailing or wire information.
Ask your employer’s benefits office or the plan administrator for a Distribution Election Form or Rollover Request Form. State clearly that you want a direct rollover to a Roth IRA.
Enter the new custodian’s name, address, and your Roth IRA account number. Some administrators also want electronic transfer routing details.
Request a cost-basis breakdown showing how much of the balance is your original after-tax contributions versus earnings. That breakdown needs to travel with the rollover so the new custodian can track it.
Decide whether to move the full balance or a partial amount, and specify the dollar figure or percentage on the form.⁵
Submit through the plan’s secure portal or by trackable mail. Plans generally liquidate and send funds within three to five business days after processing.

If the administrator mails a check payable to the new custodian to your home, forward it to the custodian promptly. Do not endorse the back. It is already payable to the receiving institution.

You May Lose the Rule of 55

If you leave your job during or after the year you turn 55, a 401(k) allows withdrawals without the 10% early-distribution penalty, even before age 59½. This is the Rule of 55. Once the money moves to a Roth IRA, that exception no longer applies. The IRS chart of early-distribution exceptions marks separation from service as available for qualified plans but not for IRAs.⁷ If you are between 55 and 59½ and might need access soon, consider leaving at least part of the balance in the 401(k).

Creditor Protection Is Different in an IRA

Money inside a 401(k) has broad federal protection under ERISA. In bankruptcy and in most non-bankruptcy situations, creditors generally cannot reach a 401(k) balance regardless of size.

Roth IRA protection is more limited. In federal bankruptcy, traditional and Roth IRA balances are exempt up to an inflation-adjusted cap, currently $1,711,975 for the 2025–2028 period. Amounts above that cap can enter the bankruptcy estate. Money rolled over from an ERISA-covered employer plan into an IRA keeps unlimited bankruptcy protection and is not counted toward that cap, provided the rollover was properly documented. Outside bankruptcy, IRA protection depends on state law, and coverage varies. If you have a large balance and creditor risk is a real concern, weigh this before rolling everything out.

How to Report the Rollover on Your Taxes

A direct Roth-to-Roth rollover is not taxable, but it still needs to appear on your return.

Form 1099-R From the Plan

The 401(k) plan administrator issues Form 1099-R in January or February of the year after the rollover.⁸ Box 1 shows the total distribution. Box 2a should show zero for a direct Roth-to-Roth rollover. Box 7 should contain Code H, which flags the transfer as a direct rollover from a designated Roth account to a Roth IRA.⁹

Form 5498 From the Roth IRA Custodian

The receiving custodian files Form 5498, reporting the rollover contribution in Box 2.¹⁰ It typically arrives by the end of May and confirms the money landed in a tax-advantaged account.

Form 1040

On Form 1040, put the total distribution from Box 1 on Line 5a. On Line 5b, enter zero and write “Rollover” next to it.⁶ Keep both forms with your records. They document the cost basis and confirm the transfer if the IRS ever asks.

If You Inherited the Roth 401(k)

A non-spouse beneficiary cannot roll an inherited Roth 401(k) into their own Roth IRA. The path is a direct trustee-to-trustee transfer into an inherited Roth IRA titled in the deceased person’s name for your benefit. You cannot add contributions to that inherited account.

For most non-spouse beneficiaries who inherited on or after January 1, 2020, the 10-year rule applies: the entire balance must be withdrawn by the end of the tenth year after the original owner’s death. If the original owner had already begun required minimum distributions, annual distributions may also be required in years one through nine. Exceptions to the 10-year timeline exist for the account holder’s minor children, beneficiaries who are disabled or chronically ill, and beneficiaries no more than 10 years younger than the deceased.

For a non-spouse beneficiary’s direct rollover to an inherited Roth IRA, the 1099-R will show Codes 4 and H in Box 7, indicating a death distribution and a Roth-to-Roth transfer.⁹

1
Office of the Law Revision Counsel. 26 U.S.C. 402A – Optional Treatment of Elective Deferrals as Roth Contributions
2
Internal Revenue Service. Retirement Plans FAQs on Designated Roth Accounts
3
Internal Revenue Service. Retirement Topics – IRA Contribution Limits
4
Internal Revenue Service. SECURE 2.0 Act Changes Affect How Businesses Complete Forms W-2
5
Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
6
Internal Revenue Service. Topic No. 413 – Rollovers From Retirement Plans
7
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
8
Internal Revenue Service. About Form 1099-R – Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
9
Internal Revenue Service. Instructions for Forms 1099-R and 5498 (2025)
10
Internal Revenue Service. Form 5498 – IRA Contribution Information