Roth 401(k) accounts have no required minimum distributions during the original owner’s lifetime. The SECURE Act 2.0 eliminated lifetime RMDs for designated Roth accounts in employer-sponsored plans starting with the 2024 tax year, aligning the Roth 401(k) RMD rules with those that have long applied to Roth IRAs.1Congressional Research Service. Required Minimum Distribution (RMD) Rules for Original Owners of Retirement Accounts Inherited Roth 401(k)s are the exception: beneficiaries still face distribution deadlines after the original owner dies.
What Changed for Living Roth 401(k) Owners
Before 2024, Roth 401(k) participants faced the same RMD schedule as traditional 401(k) participants, even though their contributions had already been taxed. Owners generally had to begin withdrawals by April 1 of the year after turning 73 or retiring, whichever came later.2Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
SECURE 2.0 removed that requirement. Starting with the 2024 tax year, no RMD is calculated or due from a Roth 401(k) for a living participant.2Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs The entire balance can keep compounding tax-free for the rest of your life and pass to beneficiaries with that same tax-free character. Anyone who owed a Roth 401(k) RMD for the 2023 tax year (based on their December 31, 2022, balance) still had to take that distribution, but 2023 was the last year the requirement applied.1Congressional Research Service. Required Minimum Distribution (RMD) Rules for Original Owners of Retirement Accounts
One boundary matters here. If your 401(k) holds both Roth and traditional pre-tax balances, only the traditional portion generates an annual RMD obligation. Traditional 401(k) balances remain fully subject to RMDs under the usual age rules.
No RMD Does Not Mean Automatically Tax-Free
Removing the RMD requirement is not the same as making every Roth 401(k) withdrawal tax-free. Only “qualified distributions” get that treatment. Two conditions have to be met: the account must satisfy a five-year holding period, and the distribution must occur after you turn 59½, become disabled, or die.3Office of the Law Revision Counsel. 26 U.S. Code 402A – Optional Treatment of Elective Deferrals as Roth Contributions
The five-year clock starts on January 1 of the first tax year you made a Roth contribution to that employer’s plan. Begin contributing in October 2022 and the clock starts January 1, 2022, with the five-year requirement satisfied on January 1, 2027. Each employer’s plan runs its own clock. Time spent contributing to a Roth 401(k) at a previous job does not carry over to a new employer’s plan.3Office of the Law Revision Counsel. 26 U.S. Code 402A – Optional Treatment of Elective Deferrals as Roth Contributions
Take a distribution before meeting both conditions and your original contributions come out tax-free, since you already paid tax on them. The earnings portion, though, is taxable as ordinary income and may face a 10% early withdrawal penalty if you are under 59½. This catches people who change jobs and cash out a relatively new Roth 401(k): the contributions are fine, but the growth gets taxed.
Inherited Roth 401(k)s Still Have Distribution Deadlines
The lifetime RMD exemption applies only while the original owner is alive. Once a Roth 401(k) is inherited, beneficiaries face distribution requirements that depend on their relationship to the deceased and when the death occurred.2Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
The 10-Year Rule for Most Non-Spouse Beneficiaries
An adult child, sibling, friend, or other non-spouse beneficiary who does not qualify for special treatment must empty the entire inherited Roth 401(k) by December 31 of the tenth year after the participant’s death.4Internal Revenue Service. Retirement Topics – Beneficiary
Whether annual withdrawals are required inside those ten years turns on a technical question: did the original participant die before or after their required beginning date for traditional RMDs? Because living Roth 401(k) owners no longer have a required beginning date at all, any Roth 401(k) participant who dies in 2024 or later is treated as dying before their RBD. Non-spouse beneficiaries can therefore let the entire balance sit and grow tax-free for up to ten years, withdrawing nothing until the final deadline. The IRS confirmed in its 2024 final regulations that annual distributions during the 10-year window are only required when the original owner dies on or after their required beginning date.5Federal Register. Required Minimum Distributions
For accounts where the original participant died before 2024 (when Roth 401(k)s still had RMDs) and had already passed their required beginning date, the annual distribution requirement does kick in. The beneficiary must take distributions in years one through nine, with the remainder by year ten.5Federal Register. Required Minimum Distributions These final rules took effect for distribution calendar years beginning January 1, 2025.
Beneficiaries Who Can Stretch Distributions
A narrow group of “eligible designated beneficiaries” can take distributions over their own life expectancy instead of following the 10-year rule:4Internal Revenue Service. Retirement Topics – Beneficiary
- A surviving spouse, who can roll the inherited Roth 401(k) into their own Roth IRA and eliminate lifetime RMDs entirely, or stay a beneficiary and take life expectancy distributions.
- Minor children of the deceased, who take life expectancy distributions until reaching the age of majority (defined as 21 in the final Treasury regulations), at which point the 10-year clock begins. The account must be fully emptied by the time the child turns 31.
- Disabled or chronically ill individuals.
- Individuals not more than 10 years younger than the participant.
The surviving-spouse rollover is the most powerful of these options, converting the inherited account into one with no lifetime RMD requirement and full control over withdrawals and future beneficiary designations.
The Five-Year Rule Carries Over
Beneficiaries inherit the original owner’s five-year clock. If the Roth 401(k) was less than five years old when the participant died, earnings distributed before the clock finishes can be subject to income tax. Contributions still come out tax-free regardless.4Internal Revenue Service. Retirement Topics – Beneficiary
Penalty for a Missed Distribution
If a beneficiary fails to take a required distribution on time, the penalty is an excise tax of 25% of the shortfall. Before SECURE 2.0, it was 50%. The tax can drop to 10% if the beneficiary withdraws the missed amount and files a return reflecting the correction within a defined window, which generally runs through the end of the second tax year after the year the penalty was imposed.6Office of the Law Revision Counsel. 26 USC 4974 – Excise Tax on Certain Accumulations in Qualified Retirement Plans The IRS can also waive the penalty entirely if the shortfall was due to reasonable error and the taxpayer is taking steps to fix it.
Why a Rollover to a Roth IRA Still Makes Sense
Roth 401(k)s and Roth IRAs now share the same lifetime RMD treatment, but rolling a Roth 401(k) into a Roth IRA still carries real advantages. The biggest one involves the five-year clock.
When you roll Roth 401(k) funds into a Roth IRA, the time those funds spent in the 401(k) does not count toward the Roth IRA’s five-year holding period. If you already have an existing Roth IRA that you contributed to more than five years ago, the rollover funds immediately satisfy the five-year requirement, because the Roth IRA uses the earliest contribution date across the entire account.7Internal Revenue Service. Retirement Plans FAQs on Designated Roth Accounts That is one of the strongest arguments for opening a Roth IRA early, even with a small contribution, just to start the clock. Without an existing Roth IRA, the rollover starts a fresh five-year period and can delay tax-free access to the earnings.
Request a direct rollover, where the plan administrator sends funds straight to the Roth IRA custodian. That avoids the mandatory 20% federal income tax withholding that applies when an eligible rollover distribution is paid directly to you.8Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions With Roth funds the withholding is eventually refunded, but having 20% of your balance locked up until you file a return is an unnecessary cash flow problem.
Beyond the five-year clock, a Roth IRA typically offers a wider range of investment options than an employer 401(k) plan and detaches your retirement savings from a former employer’s plan administration.