More About Roth

You should be aware of how withdrawals, conversions, and rollovers work with Roth.

Withdrawals While You Are Working

You can make a withdrawal while working at MIT if you are at least age 59½ and your appointment or scheduled work hours is no more than 50% effort. Rollover contributions, including rollover Roth contributions, can be withdrawn at any time. Remember, investment earnings on your Roth post-tax contributions can be withdrawn tax free only if your withdrawal is at least five years after your first Roth pre-tax contribution.

You can also withdraw Roth funds tax-free if you become disabled. If you die, your beneficiary will be eligible to make a tax-free withdrawal. Keep in mind that this information is based on current tax law, which is subject to change.

Converting Existing Pre-Tax Contributions

Under current tax law, you can convert existing pre-tax contributions in the 401(k) Plan to Roth post-tax contributions. Contributions available for conversion include your own pre-tax contributions, the MIT match, and rollover contributions. You can convert some or all of these contributions.

If you convert pre-tax contributions into Roth post-tax contributions, you must pay taxes on the converted amount at the time of this conversion. This is because Roth distributions and accumulated investment earnings are tax-free when you later receive money from the plan. You will receive an IRS Form 1099R after the end of the year to report the taxable amount of the Roth conversion. You cannot make a withdrawal from the plan to help you pay for any income taxes you owe, so make sure you have adequate funds on hand to pay the required taxes.

Note that if you make this conversion, it is irreversible under IRS rules. You cannot re-convert Roth back to pre-tax contributions or reclaim taxes you paid when you made the conversion.

Rollovers from a Previous Employer’s Retirement Plan

If you made Roth post-tax contributions to a 403(b) or 401(k) plan at a previous employer, you can roll over those savings to the MIT 401(k) Plan. Appropriate information from your prior plan must be received to accomplish this. This will typically be coordinated between the administrators of the plans.

The five-year requirement to receive tax-free Roth retirement income treatment begins as of the first day of the calendar year you first made Roth post-tax contributions to your previous employer’s plan, and applies to any future Roth post-tax contributions you make to MIT’s 401(k) Plan.

For example, if you started making Roth post-tax contributions to a previous employer’s plan on September 1, 2014, your five-year period would begin as of January 1, 2014 and be met as of December 31, 2018. You would be able to receive a tax-free payout (what you rolled over plus your Roth post-tax contributions to MIT’s 401(k) Plan plus investment earnings on all your Roth money) any time after December 31, 2018, as long as you are at least age 59½.

Pre-tax savings in a previous employer’s plan can also be rolled over to the 401(k) Plan.

Tools to Help You Learn More

  • Watch this video, which helps you compare your pre-tax and Roth post-tax options.
  • Read this newsletter (PDF) for more details on Roth.
  • Use this calculator from Fidelity Investments to compare pre-tax and Roth contributions. Insert information specific to you and see the estimated impact on your take home pay and your withdrawal at retirement.
  • Check on your account at any time by visiting Fidelity NetBenefits.