Yes, Roth Solo 401k funds can be rolled into a Roth IRA.

Rolling over funds from a Roth 401k to a Roth IRA will generally fall under 3 categories:

  • Full rollover - qualified

  • Full rollover- non-qualified

  • Partial rollover

Qualified and Non-Qualified accounts:

Just like a Roth IRA, the Roth 401k account can become "qualified" if two of the following stipulations are met:

  1. You are age 59.5 or older and

  2. The Roth 401k has been funded for 5 years or longer

Distributions may generally be taken from a qualified account without taxes owed. Distributions from a non-qualified account may incur some taxes.

The Roth 401k and Roth IRA five-year clock are different and separate. Just because you've had a Roth IRA open for longer than five years, does not extend to your Roth 401k.

Let's cover a couple of notes regarding Roth 401k to Roth IRA Rollovers:

  1. After the funds are rolled into the Roth IRA, the "ordering rules" for Roth IRAs apply

  2. If your Roth 401k rollover is non-qualified, you must keep record of which portion of the rollover is taxable and which is not. Generally speaking, the amount you originally put in as a Roth 401k contribution is non-taxable, since it was made with after-tax money. The earnings or growth on those contributions are considered taxable (especially if they have been in the account less than 5 years, or if you are under age 59.5). Leaving the earnings/growth in the Roth retirement account until the funds are qualified is one path to avoid paying taxes on the growth/earnings of Roth contributions

  3. If your Roth 401k rollover is qualified, the entire amount is considered basis (in this example, this means the non-taxable portion is your contribution, that which you can take out anytime)

  4. If you're only rolling over part of your Roth 401k funds into the Roth IRA, the taxable portion is what is considered to be rolled over first

  5. You can rollover Roth 401k funds even if you make too much money to qualify to contribute new funds to a Roth IRA

Things to remember:

Once funds are in a Roth IRA, they must stay there. It's a one-way street, and there's no going back. 

Roth IRA funds cannot roll out to any other type of retirement account, including Roth 401k plans.

Also, Roth IRAs inevitably require Roth IRA custodians, which can mean delays in getting investments done and extra costs of having a custodian involved.

Consider the reasons behind why you're rolling funds into the Roth IRA and if you'll really achieve your outcome having them in that structure.

Rolling over funds from the Roth 401k to a Roth IRA to avoid a required minimum distribution is one reason accountholders may choose to remove funds from the Roth 401k to a Roth IRA. The Roth 401k does have required minimum distributions. 

However, you'll want to calculate for your situation which is more advantageous to you. While you can avoid having to take out funds through RMDs, you'll have to pay higher custodial fees and could lose the checkbook control access to your retirement fund the Solo 401k affords you.

NOTE: This article only details rolling over Roth 401k funds to a Roth IRA. Rolling over any traditional (pre-tax) 401k funds to a Roth IRA is considered a Roth conversion, which is a taxable event.


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