livesoft wrote:Are not after-tax contributions documented by your filing of Form 8606 each year. Are by the form 5498 each year? Do you actually need the vendor to keep track of these for you or are your records sufficient for the IRS when you begin withdrawals?
boglesmymind wrote:I cant roll it into my ROTH. I'm still limited to $6000/yr contributions in the ROTH. The firm that reccomended I roll out the after tax portion said I could then dribble $6k/yr into my ROTH provided I had $6k of earned income each of those years.
Sidney wrote:You aren't required to file an 8606 for 401K plans. You may want to consider trying to roll the after-tax piece to a ROTH. It is a bit complicated but apparently can be done. Search this site for a couple threads on the subject.
EmergDoc wrote:I'm playing with this now. One great solution if you change jobs is to roll the entire 401K out to an IRA, then roll it back into a 401K. Since most 401Ks don't accept rollovers involving after-tax money, that money can't go in. So you basically contribute all the tax-deferred money back into the 401K, leaving you an IRA that costs you nothing to convert. I'll let you know how mine works out this fall.
Shawn wrote:Up until 10 days ago, I had both pre-tax and after-tax contributions in a 401a at a former employer and a 401k at my current employer, with both plans being administered by Fidelity.
With the January 1, 2010 elimination of the $100K income limit for TIRA/401 to Roth IRA conversions, I was able to take my after-tax contributions and the earnings on the after-tax contributions from both 401 plans and roll them into a Roth IRA at Fidelity. The pre-tax contributions remain in the 401 plans. I believe I could have rolled the earnings on the after-tax contributions into a TIRA, but my earnings were essentially zero so this was a non-issue.
This happened without a hitch, perhaps helped by the fact I did a Fidelity to Fidelity transfer. Fidelity sent me documentation clearly stating what was rolled into the Roth IRA (i.e., after-tax contributions and their earnings) and the taxable amount, which was essentially zero.
Unlike a TIRA to Roth IRA conversion, the pro-rata rule doesn't appear to apply with 401 to Roth rollovers. Some people seem to disagree with this. I can only state how my situation was handled.
Mitchell777 wrote:I need to investigate this possibilty also. Did Fidelity say that both the after tax contributions AND the earnings on those after tax contributions had to be withdrawn from the 401K and rolled into the Roth?
Default User BR wrote:Mitchell777 wrote:I need to investigate this possibilty also. Did Fidelity say that both the after tax contributions AND the earnings on those after tax contributions had to be withdrawn from the 401K and rolled into the Roth?
Well, the tax laws say that post-1986 after-tax contributions must bring their share of earnings during a rollover. There are methods to split the taxable portion off into a TIRA, one outlined in a Fairmark article.
Mitchell777 wrote:I need to investigate this possibilty also. Did Fidelity say that both the after tax contributions AND the earnings on those after tax contributions had to be withdrawn from the 401K and rolled into the Roth? Thanks
retcaveman wrote:When my spouse rolled her pension to Schwab, she was told she had to take the after-tax money out ie she couldn't roll it. While no taxes were due, we lost the tax deferral (so we bought savings bonds when the annual max was $30k). Not sure if that was just her company, Schwab or IRS requirement.
retcaveman wrote:I checked Jane Bryant Quinn's book, Making the Most of Your Money which is a reference I use for a lot of my finance questions. On Page 757, she says "Rollovers are only for pretax money. If you made any after-tax contributions to your pension plan, those have to be removed."
However, she goes on to say, "If you want to keep this extra money in a tax-deferred investment, consider a nondeductible IRA." I didn't know about this second part. I assume you have to do this within 60 days.
Any nontaxable amounts that you roll over into your traditional IRA become part of your basis (cost) in your IRAs. To recover your basis when you take distributions from your IRA, you must complete Form 8606 for the year of the distribution. See Form 8606 under Distributions Fully or Partly Taxable later.
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