Frequently asked questions
What is the difference between a Roth and a traditional account?
When the tax is paid. A traditional 401(k) or IRA gives you the deduction now and taxes every withdrawal later. A Roth takes the tax now and the qualified withdrawals come out tax-free. If your tax rate in retirement will be lower than it is today, traditional usually wins. If it will be the same or higher, Roth usually wins.
Do Roth accounts have required minimum distributions?
A Roth IRA has none during the original owner's lifetime. Roth 401(k) and Roth 403(b) accounts used to require them, and SECURE 2.0 removed that requirement starting in 2024. Inherited Roth accounts are a separate case and generally still have to be emptied within 10 years.
What is the Roth five-year rule?
There are two. Earnings come out tax-free only if five tax years have passed since your first Roth IRA contribution and you are 59 and a half or otherwise qualify. Separately, each conversion has its own five-year clock before the converted amount can be withdrawn without a penalty if you are under 59 and a half. Converting late in life is where people get caught by the second one.
Is a rollover the same as a conversion?
No, and the difference is the tax bill. A rollover moves money between accounts of the same tax treatment, such as a 401(k) to a traditional IRA, and is not a taxable event. A conversion moves money from pre-tax to Roth and is taxable in the year you do it.
Can I contribute to a 401(k) and an IRA in the same year?
Yes. They have separate limits. Being covered by a workplace plan can reduce or remove the deduction on a traditional IRA contribution above certain income levels, and a Roth IRA contribution phases out above its own income range. Check the current year's figures on IRS.gov, because both move with inflation.
When do required minimum distributions start?
Age 73 under SECURE 2.0, rising to 75 in 2033. The first one can be deferred to April 1 of the following year, but doing that puts two distributions into one tax year, which is often a worse outcome than taking the first one on time.