How to Withdraw From a Roth 401(k)

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Companies who provide a 401(k) plan option for their employees can also offer a Roth 401(k) plan to help employees save for retirement. Roth 401(k) plans offer after-tax savings, which means money in the account grows tax-free and qualified withdrawals can be taken tax-free. However, the portion of a nonqualified withdrawal that comes from earnings will be subject to taxes and an early withdrawal penalty. When you take a withdrawal, you must report it on your income taxes even if the amount is not taxable.

Determine whether you can take a distribution from your Roth 401(k) plan. Qualified distributions can only be taken if the account is more than five years old and either you are at least 59 1/2 years old or have a permanent disability. Nonqualified distributions include distributions for a permanent disability when your account is less than five years old, hardship distributions and distributions taken after you have left employment. If you are still employed and do not have a financial hardship, you cannot take an early distribution.

Request a distribution from your Roth 401(k) plan by completing a 401(k) plan withdrawal form, available from your 401(k) plan administrator. This document will require your identification, including Social Security number, and your account information.

Report the distribution on your income taxes using form 1040A or form 1040. If you took a qualified distribution, report the entire amount as a nontaxable pension and annuity withdrawal. This amount will not be included in your taxable income and you are finished. If you take a nonqualified withdrawal, the portion of the account that comes from earnings must be included as taxable income. This amount will be reported on the form 1099-R form that your financial institution will send you.

Complete form 5329 if you take a nonqualified distribution to calculate the early withdrawal penalty you owe. Once you have calculated the penalty, report it on your income taxes using form 1040.