Roth 401(k) RMD rules changed with the SECURE Act 2.0: for tax years starting in 2024, living owners of a designated Roth account in an employer plan no longer have to take required minimum distributions.1Congressional Research Service. Required Minimum Distribution (RMD) Rules for Original Owners of Retirement Accounts Roth 401(k)s now line up with Roth IRAs on this point. The rules still bite in two situations most people don’t think about: inherited accounts, and any withdrawal that hasn’t cleared the five-year holding period.
What Changed in 2024
Before 2024, a Roth 401(k) carried the same RMD obligation as a traditional 401(k), even though the money going in had already been taxed. The last year that requirement applied was 2023. Anyone who owed a Roth 401(k) RMD for the 2023 tax year (calculated on the December 31, 2022, balance) still had to take it, but no RMD is calculated or due for a living Roth 401(k) participant from 2024 forward.2Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
Traditional pre-tax 401(k) balances are unaffected. Those still generate an annual RMD once you reach the required beginning age, currently 73 for people born between 1951 and 1959, and 75 for those born in 1960 or later.1Congressional Research Service. Required Minimum Distribution (RMD) Rules for Original Owners of Retirement Accounts If your 401(k) holds both Roth and traditional money, only the traditional portion drives the RMD calculation.
The Five-Year Rule Still Applies
No RMD does not mean every withdrawal is tax-free. A Roth 401(k) distribution is only “qualified” (fully tax-free on both contributions and earnings) if two conditions are met: the account has satisfied a five-year holding period, and the distribution happens 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. Contribute for the first time in October 2022, and the clock started January 1, 2022; you clear the five-year mark on January 1, 2027. The clock is plan-specific. Years spent contributing to a Roth 401(k) at a former employer don’t carry into a new employer’s plan.3Office of the Law Revision Counsel. 26 U.S. Code 402A – Optional Treatment of Elective Deferrals as Roth Contributions
If you pull money out before meeting both conditions, your own contributions come back tax-free because they were already taxed. The earnings portion is taxable as ordinary income and can trigger the 10% early withdrawal penalty if you’re under 59½. This trips up people who cash out a young Roth 401(k) after changing jobs.
Inherited Roth 401(k)s: Beneficiaries Still Have Deadlines
The RMD exemption is a lifetime rule for the original owner. Once the account is inherited, distribution deadlines return, and they depend on who the beneficiary is.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 doesn’t qualify for special treatment has to empty the 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 that ten-year window turns on whether the original participant died before or after their required beginning date for RMDs. Since living Roth 401(k) owners no longer have a required beginning date, any Roth 401(k) owner who dies in 2024 or later is treated as dying before it. The IRS confirmed in its 2024 final regulations that annual distributions during the 10-year window are only required when the owner died on or after that date.5Federal Register. Required Minimum Distributions Practically, a non-spouse beneficiary can leave the balance untouched and let it grow tax-free, then take the whole thing by the year-ten deadline.
For accounts inherited before 2024, when Roth 401(k)s still had RMDs, and where the original participant had already reached their required beginning date, the annual distribution requirement does apply in years one through nine, with the remainder due by year ten. Those final rules took effect for distribution calendar years starting January 1, 2025.5Federal Register. Required Minimum Distributions
Eligible Designated Beneficiaries
A narrow group can stretch distributions across their own life expectancy rather than compress them into ten years:4Internal Revenue Service. Retirement Topics – Beneficiary
- A surviving spouse, who can also roll the inherited Roth 401(k) into their own Roth IRA and eliminate lifetime RMDs entirely. SECURE 2.0 added an option to be treated as the deceased employee for RMD timing, though the IRS has delayed the compliance deadline for that provision until at least January 1, 2027.
- A minor child of the deceased, who takes life expectancy distributions until the age of majority (21 under the final Treasury regulations), at which point the 10-year clock starts and the account must be empty by the time the child turns 31.
- A disabled or chronically ill individual.
- Any beneficiary not more than 10 years younger than the participant.
The spousal rollover is the strongest option. Moving the balance into the surviving spouse’s own Roth IRA converts it into an account with no lifetime RMD and full control over future distributions and beneficiaries.
The Inherited Five-Year Clock
Beneficiaries also inherit the original owner’s five-year clock. If the Roth 401(k) hadn’t hit five years when the participant died, earnings distributed before the clock runs out may be taxable as ordinary income. Contributions still come out tax-free.4Internal Revenue Service. Retirement Topics – Beneficiary This mostly comes up when someone dies not long after opening the account.
Penalty for a Missed Distribution
Missing a required distribution triggers an excise tax of 25% of the shortfall. SECURE 2.0 dropped it from 50%. The tax can be reduced further to 10% if the beneficiary withdraws the missed amount and files a corrected return within a defined window, generally through the end of the second tax year after 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 waive the penalty entirely for reasonable error if the taxpayer is taking steps to fix it.
Rolling a Roth 401(k) Into a Roth IRA
Even with lifetime RMDs off the table for both accounts, moving a Roth 401(k) into a Roth IRA is often worth doing, mostly because of how the five-year clock behaves.
Time spent in the Roth 401(k) does not carry over to a new Roth IRA. But if you already have a Roth IRA that you first contributed to more than five years ago, rolled-over funds immediately satisfy the Roth IRA’s 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’s a strong argument for opening a Roth IRA early, even with a token contribution, just to start the clock. Without an existing Roth IRA, the rollover starts a fresh five-year period.
Use a direct trustee-to-trustee transfer. An eligible rollover distribution paid directly to you is subject to mandatory 20% federal withholding.8Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions With Roth money that withholding eventually comes back at tax time, but it locks up a fifth of your balance in the meantime. A direct rollover avoids it.