Withdrawing contributions from Roth 401(k) tax and penalty free. How do I know what my contributions are?

Evidently, it's possible to withdraw Roth 401(k) contributions tax and penalty free after 5 years. My question: how do I know what amount in my Roth represents contributions if I haven't been tracking this myself (I haven't). Do the Big Guys like Vanguard, Prudential, Fidelity, etc, track contributions? Can I get a statement of my total contributions if I ask?

I'm asking because I'm considering using (part of) my Roth 401(k) contributions as a sort of Emergency Fund. I've maintained an Emergency Fund in a money market fund for a decade and have never had to withdraw from it. Hate leaving money there--seems unproductive.

I know it's a bad idea to raid retirement plans for just about any purpose; but an emergency, I define as something truly dire. I also have a non-Roth IRA.

Reply to
mike
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I believe (I hope others can confirm or deny this) that our own contributions come out of a Roth IRA first. I suggest you review all your papers since you first had earned income to determine how much is your own contribution. Fidelity may be able to provide this number for you (just my speculation).

Reply to
Stan K

You are mixing two issues. You can withdraw Roth deposits at any time, no tax, no penalty. IIRC, the Roth was born in 1998, not so long ago. Your broker should be able to tell you what you deposited and then you'll know how much growth you have (if any).

Joe

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Reply to
JoeTaxpayer

Both of the previous replies seem to be missing the fact that this is a Roth 401(k), not a Roth IRA. Whether and how you can take your after tax salary deferrals out of your Roth 401(k) is probably subject to the employer's plan document, ask your personnel department at work. Usually they don't let you take anything out as long as you are an employee, although a loan might be an option.

-Mark Bole

Reply to
Mark Bole

Both of the previous replies seem to be missing the fact that this is a Roth 401(k), not a Roth IRA. Whether and how you can take your after tax salary deferrals out of your Roth 401(k) is probably subject to the employer's plan document, ask your personnel department at work.

Usually they don't let you take anything out as long as you are an employee, although a loan might be an option. I'd be surprised if they let you take out deferrals after five years.

There are some five-year rules for Roth IRA contributions and conversions (from traditional IRA), but the question isn't about either of these.

-Mark Bole

Reply to
Mark Bole

Thanks - right, my answer was appropriate for a Roth IRA, not 401. Completely missed that. Sorry.

Reply to
JoeTaxpayer

First, you'll need to know if your employer offers "IN-SERVICE" withdrawals from the plan. In service means while you're still employed. Most 401K type plans do NOT allow you to take your money out while you're still employed, though some do allow loans (but I'm not sure how the loan rules work with the Roth 401k). Your first step will be to ask HR about your retirement plan administration rules and options.

As a side note, if you're eligible to have a Roth IRA you might be able to use this as an adjunct option to your Roth 401K. By having your own Roth IRA you could fund it by transferring some of your "emergency fund" money into it annually - within the confines of what's allowable.

What I don't quite understand is your position about your emergency fund being unproductive in a money market type account.

Emergency fund money is just that - money you may need for an emergency. As such you shouldn't subject it to too much risk. If you're going to use retirement plan money for an emergency, that same concept applies - you should have some amount of money that is in a low risk, highly liquid place so you can get it if you need it.

On the other hand, if you want your emergency fund money to be "more productive" there is nothing stopping you from investing it in something you consider more productive. Though I would still caution you that you should still have some liquid money available.

As a tax AND financial advisor with 30 years in the business, one of the things I see frequently is that most folks try to segregate their money into virtual boxes - this is my emergency fund money so I have to keep it separate and apart from my retirement money.

Its good to know how your money is allocated but you should also consider your portfolio as a whole. For example, if your allocation model says that you should have 20% of your portfolio in cash you have to decide whether that means that you have to have 20% of your IRA in cash PLUS 20% of your

401K in cash PLUS 20% of your retail account in cash OR whether you can look at your investments in aggregate and have 20% of the total value in cash, but hold all of that cash in your retail account - where you could access it in an emergency if necessary.

Good luck, Gene E. Utterback, EA, RFC, ABA

Reply to
Gene E. Utterback, EA, RFC, AB

I suspect my low MM interest rate, combined with the fact that I presently pay taxes on that interest, isn't keep pace with inflation. Don't know what the official inflation rate is on whatever basket of goods that's calculated on, but it seems to me that I'm always progressively paying more for the things in my own personal bucket of goods and services.

I understand. Thing is, I have what I believe is a larger emergency fund (relative to my own expenses) than many. What's the standard recommendation? To have 3-6 months worth of expenses? I've allocated ~1.5 years of mortgage payments (20 months) for my own emergency fund. Although that's where my comfort level is at, it seems a lot to be in as something as conservative as a non-tax sheltered MM account. Perhaps I should divide things up as you suggest.

Reply to
mike

1) 401K compensation is marked in the special boxes on a W2. You should have copies of these. 2) Some big brokers to track gains. Mine does.
Reply to
rick++

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