Yes. For those of you are familiar with IRAs, this is one area where, so to speak, the IRA may be simpler and more beneficial to the account owner. Generally speaking, Roth IRAs do not need to be distributed from the IRA; however, the 401(k), as a qualified employer-sponsored plan must distribute assets at some point in time. Usually, distribution of 401(k) assets occurs when the business is terminated. In simple terms, if a Trustee was still operating their business and plan by the time they reach 70 1/2, they would be required to take RMDS….whether the funds are held in pre-tax, Roth or a combination of accounts.
These distribution rules also require your beneficiaries, usually family members, to be bound to distributions requirements as well. However, there is one possible exception to this rule. While you would always want to refer with a tax professional, with proper planning, the business and the 401(k) could be terminated prior to 70 1/2 with all Roth assets being rolled over to a Roth IRA..
← Self Directed FAQs