Ask an Advisor: Should I Move My Roth 401(k) to a Roth IRA? Do I Need to Wait 5 Years Before Making Withdrawals?

I retired four years ago and will be 73 next year. Does it make sense to move my Roth 401(k) to a Roth IRA? Better choices, but more costs to manage. If I make the move, do you need to wait five years to make withdrawals after this type of rollover? – Carol

Rolling over your Roth 401(k) to a Roth IRA is just about as clean a move as it gets. You’re changing the container that holds your funds, but the rules that govern your access to them will be virtually the same. There is, however, a notable exception in the five-year rule, which actually could end up benefitting you.

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Roth 401(k) vs. Roth IRA

Let’s walk through a quick refresher on the main differences between these two Roth accounts.

Some employers who offer the standard pre-tax 401(k) may also offer a Roth version. How much you earn doesn’t have a direct impact on whether or not you can contribute to a Roth 401(k). Contributions to a Roth 401(k) come directly out of your paycheck, after taxes are deducted. These contributions and subsequent earnings grow tax-deferred and can potentially be withdrawn tax-free in retirement.

A Roth IRA is a type of investment account typically offered by brokerages that can be used by anyone, regardless of employment status. Contributions are also made with after-tax money, but access is limited by your annual earnings. In 2026, single tax filers are ineligible to contribute to a Roth IRA if their modified adjusted gross income (MAGI) is $168,000 or above, while married joint filers become ineligible with MAGI of $252,000 or greater.

There are only two ways to “contribute” to a Roth IRA when you exceed the income limits:

Convert pre-tax funds from a traditional 401(k) or an IRA to a Roth IRA and pay taxes on the converted amount (includes original contributions and earnings).
Roll over after-tax funds from a 401(k) or similar workplace account to a Roth IRA and preserve the tax-deferral status of your earnings.

To answer your questions more specifically, let’s look closer at the second scenario.

What to Consider When Doing a Rollover

You have clearly heard of the five-year rule, which has various applications that apply to both Roth IRA conversions and contributions. For your sake, the only part that applies is the five-year rule for Roth contributions. As part of this, a conversion is considered to be when you change the tax status of your funds, which you’re not doing in a Roth-to-Roth rollover.

The rule concerns whether you meet the requirements to withdraw earnings on contributed funds, which is any money you contributed directly to your Roth IRA or you moved from the Roth 401(k) to the Roth IRA, without triggering taxes. Tax-free withdrawals of earnings can be made, so long as:

The Roth IRA accepting the rollover has been open for at least five years, AND
The withdrawal occurs under a qualifying condition, such as the account owner reaching age 59 ½, becoming disabled or making a first-time home purchase.

Although you say you retired four years ago, you don’t say whether that’s when you opened the Roth IRA. If you opened it at least one year prior to retirement, then you have met the five-year rule and you can withdraw earnings tax-free. If you opened the Roth IRA within the last four years, that opening is when the five-year clock began, so you’ll need to wait to withdraw earnings tax-free. However, remember contributions that you made are always accessible tax-free, and penalty-free since you’re over age 59 ½.

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Potential Benefits and Downsides of a Roth-to-Roth Rollover

Whether this type of rollover makes sense requires more knowledge about your financial situation, particularly the other types of accounts you own. But generally speaking, there are a few potential benefits and downsides to consider.

The 5-Year Clock Defaults to Your Roth IRA

When you move funds from a Roth 401(k) to a Roth IRA, the five-year clock defaults to January 1 of the year you opened and funded the Roth IRA. Depending on when the five-year clock started for your Roth 401(k), you could be skipping ahead by executing a rollover. On the other hand, you could be delaying tax-free withdrawals.

You said you retired four years ago, so you have at least been contributing to your Roth 401(k) since the year you retired in 2022. Perhaps this was the first and only year you contributed to that account. In that case, you’d need to wait until January 1, 2027 to withdraw your earnings tax-free from the Roth 401(k).

If your Roth IRA was opened earlier than 2022 and has already met the five-year requirement, you could execute the rollover and access tax-free earnings without delay. Conversely, if your Roth IRA is newer than your Roth 401(k), you could end up holding up your earnings since the Roth IRA clock becomes the default after a rollover.

No RMDs

Thanks to the SECURE Act 2.0, Roth 401(k)s are no longer subject to required minimum distributions (RMDs), so you have nothing to worry about here. Roth IRAs have long been exempt from RMD calculations. The more of your nest egg that lives in these after-tax accounts, the less you will have to withdraw annually to meet IRS requirements.

More Investment Flexibility

It’s common for employer-sponsored plans to have limited investment options, or at least more limited than what you’d see offered in an IRA. If your 401(k) investment menu is feeling stale or doesn’t give you much customization, a Roth IRA could fix that.

You will, however, want to pay close attention to investment fees. Some 401(k)s offer institutional pricing you won’t get in an IRA, and there may also be administrative costs you can avoid in an IRA.

Simplicity

I’m a big proponent of maintaining fewer investment accounts whenever possible. This leaves you with less to keep track of when it comes to withdrawals, tax reporting and rebalancing. It may be particularly beneficial to do the Roth 401(k) to Roth IRA rollover if your accounts are held by different custodians, such as Schwab and Vanguard, requiring you to log in to multiple dashboards to keep tabs on things.

Bottom Line

Like any financial move, weigh the potential benefits and downsides of a rollover in the context of your overall financial situation. Consider whether you plan to make future conversions of pre-tax funds to a Roth account, when you need access to your earnings and whether consolidating your accounts will make things easier to manage. A financial advisor can help you map out the possibilities or if you need more personal help.

Tips for Retirement Planning

A financial advisor can help you prepare for retirement and the taxes that come with it. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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