Broker locked my roth 401K

[joeblow]

I have a roth 401k with TDameritrade. They informed me they are no longer going to have such accounts and they have locked mine. I cannot buy or sell or do anything with it. They said I can liquidate it or transfer it to another broker. I have only had the account a couple of years and have lost money, ie no profit. I was wondering if I liquidate it would I have to pay the 10% penalty since I am not 59 1/2. The reason I am hoping I would not is that I already paid the tax on these funds and since I did not make any profit I am not really benefiting by withdrawing it early. I obviously have no idea how it works so does anyone know? Also does anyone know any online brokerages that honor roth 401ks in case I decide to transfer it. It's really $hitty what TD did since I have options in the account and I literally cannot do anything with anything in it.

 

[Spock]

You did not mention if you are still working for the employer that sponsored the 401K.
If not, you can probably roll it into a Roth IRA with no penalties.

 

[joeblow]

Yes I am still working for the company. I am self employed so it is my company.

 

[Spock]

So I guess it's up the the plan documents (or maybe the custodian=TD) as to whether or not active employees can rollover out of the plan while still employed. Since TD suggested rolling it to another brokerage they apparently don't have a problem with it.
It's up to you if it's worth keeping the 401k flavor of it (find another custodian for the plan) or just move it to a Roth IRA.

 

[MarieIG]

Vanguard used to have 401k for solos. I'm not sure if they still do.

But - rather than withdraw the funds, if you want to transfer it to another broker, open either your Roth 401k, or individual Roth IRA, and have the money pulled.

 

[aja8888]

Vanguard used to have 401k for solos. I'm not sure if they still do.

But - rather than withdraw the funds, if you want to transfer it to another broker, open either your Roth 401k, or individual Roth IRA, and have the money pulled.

I had a solo 401K with Vanguard for a few years. I rolled it over to Schwab when I got tired of Vanguards terrible service. I did the rollover from Schwab's site.

 

[joeblow]

Ok but what about the penalty if I just liquidate it?

 

[aja8888]

Ok but what about the penalty if I just liquidate it?

Well, I guess you would have to pay it. Try a transfer.

You might have to sell the securities inside the 401K but not pull them out. Pulling them out early is what causes the penalty.

 

[pb4uski]

I think you would have to pay a penalty if you withdrew.

You could go on Schwab and set up a Roth IRA in less than 10 minutes. Then once the Roth is set up, arrange a transfer of your Roth 401k from TDA to your new Roth IRA at Schwab. That will take another 5-10 minutes. If you do everything right in a few days you'll see all your positions on Schwab.

I'm in the middle of doing this for my mother's Roth but hers is a Vanguard Roth IRA to a Schwab Roth IRA. I can see the assets left Vanguard yesterday and am waiting for them to be posted to Schwab.

 

[joeblow]

I can see paying the 10% and tax if there is a penalty but it blows you have to pay even if there is a loss. Any tax benefits to the loss?

 

[pb4uski]

No, no tax benefit from the loss but there wouldn't be tax if thee was a gain either. Just an early withdrawal penalty of 10% of the early withdrawal. Thems the rules... they haven't changed.

 

[qwerty3656]

I thought you could withdraw contributions before 59 1/2 w/o penalty.

 

[MarieIG]

I had a solo 401K with Vanguard for a few years. I rolled it over to Schwab when I got tired of Vanguards terrible service. I did the rollover from Schwab's site.

Do you still have it? I'm wondering if Schwab's gobbling up TD Ameritrade has anything to do with the locking of OP's account. But - in any event, easy enough to call Schwab (as they tend to answer the phone) and see if he can set up the account.

 

[aja8888]

Do you still have it? I'm wondering if Schwab's gobbling up TD Ameritrade has anything to do with the locking of OP's account. But - in any event, easy enough to call Schwab (as they tend to answer the phone) and see if he can set up the account.

When I stopped consulting I closed it out.

 

[MarieIG]

When I stopped consulting I closed it out.

Makes sense. Via a rollover to avoid a tax hit (for OP)?

 

[aja8888]

Makes sense. Via a rollover to avoid a tax hit (for OP)?

I was over 70 at the time so I had no tax issues. He's much younger and in the zone for a penalty if he closes it and withdraws the funds. He should just roll it to Schwab as is.

 

[Out-to-Lunch]

I agree with qwerty: There should be no tax or penalty. You can always withdraw up to your contribution basis. In your case with a loss, obviously the entire amount is less than your contribution basis.

Now, whether or not it is smart to remove such funds from a tax-free shelter like a Roth is a different question.

 

[MarieIG]

I was over 70 at the time so I had no tax issues. He's much younger and in the zone for a penalty if he closes it and withdraws the funds. He should just roll it to Schwab as is.

Agreed.

 

[Sunset]

OP - Just transfer your self 401K roth to another brokerage "IN KIND".

Means no sales, no loss, nothing changes except it will be at the new brokerage.

Call up either Vanguard, or Schwab and tell them you want to transfer the self 401K roth to them . They will help.

I have a Vanguard self 401k roth.

 

[pb4uski]

I thought you could withdraw contributions before 59 1/2 w/o penalty.

Yes, you can withdraw contributions without penalty.

 

[badatmath]

I believe the account has to be open 5 years if you want to get the money out.

Here is one explanation:
https://www.unionbank.com/personal/...le-this-mistake-could-cost-you-your-tax-break

But remember I am badatmath may not apply.

 

[steelyman]

I think the Schwab/TD merger already mentioned might be the issue. There’s some transition information:

https://www.tdameritrade.com/why-td-ameritrade/td-ameritrade-charles-schwab.html

 

[Out-to-Lunch]

I believe the account has to be open 5 years if you want to get the money out.

Here is one explanation:
https://www.unionbank.com/personal/...le-this-mistake-could-cost-you-your-tax-break

But remember I am badatmath may not apply.

Again, the contributions are not taxable and are penalty-free, even if the account is one day old. That article is implicitly referring to taxation of earnings.