Can I avoid 401k 10% early withdraw penalty if I first roll it over to roth ira and then take it out?

The short answer is yes you will avoid the 10% penalty on the amount rolled over, but any gains that your withdraw will be subject to taxes and the 10% penalty if you are not 59 1/2 when you withdraw it. There are other considerations, namely whether your employer will permit you to withdraw the money from your 401k. Also, If your account balance is large enough the Roth conversion could bump you up to a higher tax bracket. If you can withdraw from the 401k there are other ways to access that money without waiting the 5 years and without being penalized, by setting uo substantially equal periodic payments for at least five years. Depending on your age you can take penalty free distributions from your 401k if you retire over the age of 55.

If you are still employed by the firm that sponsors the 401(k), a rollover is not possible. You would have to quit first. Many 401(k) plans do allow in-service distributions for certain emergencies specified in the plan but a bulk rollover into any type of IRA is not possible.

When you rollover a traditional 401(k) or traditional IRA into any type of Roth plan, the entire transaction is subject to income tax although the 10% early distribution penalty does not apply. That might be an option in a year where your income is usually low so that you take advantage of the lower tax brackets but it can take a number of years to recover the taxes paid within the plan.

If your 401K was not a Roth you will pay the penalty. You cannot roll over a standard 401 into a Roth. You can roll over into a standard IRA at no penalty. You cannot withdraw without a penalty until age 59 1/2.

Very slowly and carefully by talking to the trustee of your 401K plan to make sure that the plan would even allow you to try to roll the amount over to a ROTH IRA at that time in your life and of course IF they do allow you to do this the FIT amounts will have to be paid on the taxable amount that would be rolled over during that tax year for that purpose and time in your life to make it a qualified ROTH IRA with after income tax funds.

So how much is the FIT amount going to be at this time in your life??

Hope that you find the above enclosed information useful. 01/13/2014

Yes, five years after the rollover you can take out the money without a penalty.

But why would you do that? How are you so desperate for money that you want to sacrifice your retirement savings, and yet you can afford to pay the tax now and then wait 5 years?

Better plan: take the amount you would be paying in tax, and invest it for 5 years.

There's really no way to tell. Nobody knows what the rules on withdrawals from a Roth IRA will be in five years. Congress can change them at any time.

If you are allowed to make the traditional 401k-to-ROTH conversion, then distributions (after 5 years) are not penalized.

sorry, there is an early withdrawal penalty on that too

if you are referring to the Roth that is not tax based, you would have to pay the income tax on the conversion

Can't roll a 401K into a Roth.

So no, you can't.