Savers who chose a Roth 401(k) at work used to face an odd penalty for their planning: even though the money grew tax-free and came out tax-free, the government still forced annual withdrawals once they hit their seventies, the same as a traditional pretax account. A change in the retirement law swept that mismatch away. Starting in 2024, a designated Roth account inside a workplace plan no longer requires distributions during the owner’s lifetime, bringing it in line with the Roth IRA that never had them.
What changed for designated Roth accounts in 2024
The shift came from Section 325 of the SECURE 2.0 Act and took effect for tax years beginning after the end of 2023. The Internal Revenue Service reflects the result in its distribution guidance, which now states plainly that the required minimum distribution rules do not apply to Roth IRAs or designated Roth accounts while the owner is alive. A designated Roth account is the Roth bucket inside an employer plan, most commonly the Roth portion of a 401(k) or 403(b). Before the change, that bucket was lumped in with pretax balances for the purpose of forced withdrawals, so a retiree who wanted to leave Roth money alone had to take it out anyway or move it first. Now the account can sit and compound, untouched, for as long as the owner lives. The timing of the switch is worth pinning down, because it turned on the tax year rather than a birthday: a Roth 401(k) distribution was still required for 2023, and only for 2024 and later years does the requirement disappear. Anyone who reached the required-distribution age right as the rule flipped should confirm which years were affected, since a payout that was mandatory one year became optional the next.
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The workaround the old rule forced on savers
Under the prior system, the common escape was to roll a Roth 401(k) into a Roth IRA before required distributions began, because the Roth IRA had never been subject to lifetime withdrawals. That maneuver worked, but it carried friction and risk: it meant closing out the workplace account, and rolling over funds that had not yet met the Roth five-year holding requirement could complicate the tax treatment of later withdrawals. The IRS comparison of Roth IRAs and designated Roth accounts lays out the features that once diverged and now largely align on this point. Removing the lifetime distribution requirement means a saver who prefers to keep the money in the employer plan no longer has to uproot it purely to dodge a forced payout. The choice between staying put and rolling over can now rest on fees, investment options, and convenience rather than on an RMD deadline.
Why tax-free compounding is the real prize
The value of the change is measured in the years of untaxed growth it preserves. A forced withdrawal from a Roth account does not itself create a tax bill, since qualified Roth distributions are tax-free, but it does pull money out of a shelter where every future dollar of growth would also have escaped tax. Once withdrawn, that money sits in a taxable account, where dividends and gains are once again exposed. Leaving a Roth 401(k) intact lets the balance keep growing tax-free, and for savers who do not need the money to live on, that turns the account into one of the more efficient assets to pass to heirs. The account can now serve the same estate-planning role as a Roth IRA, with no annual erosion demanded by the government. The relief also removes a smaller headache from plan administration: because pretax and Roth balances often shared a single 401(k), the old rule forced a calculation that separated the two so the Roth portion could still be swept out on schedule, and dropping the lifetime requirement lets the Roth side simply stay put.
The five-year rule that still governs tax-free access
Freedom from forced withdrawals is not the same as unrestricted access, and the distinction matters for a retiree deciding when to touch the money. For a designated Roth account’s earnings to come out completely tax-free, the distribution has to be qualified, which generally means the owner is at least 59½ and the Roth account has been open for at least five years. Pulling earnings before both tests are met can make part of the withdrawal taxable and, in some cases, subject to an additional penalty, even though the contributions themselves were already taxed going in. Rolling a Roth 401(k) into a Roth IRA can also reset or complicate that five-year clock depending on the accounts involved, which is one more reason the decision to move the money should not be made casually. The upshot is that the 2024 change frees the balance to sit and grow, but the rules that decide whether a later withdrawal is truly tax-free continue to turn on age and holding period.
Beneficiaries still face required withdrawals
The relief applies to the owner, not to everyone who eventually inherits the account. The same IRS guidance that lifts lifetime distributions is explicit that beneficiaries of Roth IRAs and designated Roth accounts remain subject to the required distribution rules after the owner’s death. Most non-spouse heirs are bound by the ten-year rule, which generally requires the inherited account to be emptied within a decade of the original owner’s death, though those distributions are typically tax-free for a qualified Roth account. For the owner, the takeaway is straightforward: a Roth 401(k) can now be left alone for life, a benefit that took effect in 2024 and puts workplace Roth savings on the same footing the Roth IRA has always enjoyed.
This article was produced with the assistance of artificial intelligence and reviewed by The Financial Wire editorial team.
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