My wife has three rollover IRA's from prior jobs which i want to move into her companies 401k. This will help her contribute to ROTH IRA.
My question is, when you rollover from 401k into IRAs or from rollover IRA's back into 401k , is there a cost basis which i need to worry about ?
My understanding is that since IRA ( or 401k) contributions are deductible at the time they're made, and so when the account holder starts taking distributions in retirement, the full amount of each distribution is subject to tax and hence no need to worry about cost basis.
Am i right about the cost basis assumption ?
Any gotcha's I need to worry about when i move the Rollover IRA back into 401k ?
This move is from Vanguard ( index funds and ETFs) into Fidelity ( index funds). TIA
Moving Rollover IRA into 401k , cost basis to worry about ?
-
- Posts: 204
- Joined: Mon May 11, 2015 10:39 am
Moving Rollover IRA into 401k , cost basis to worry about ?
“If a statue is ever erected to honor the person who has done the most for American investors, the hands-down choice should be Jack Bogle.” - Mr. Buffett - Berkshire Hathaway ’s 2016 annual report.
Re: Moving Rollover IRA into 401k , cost basis to worry about ?
If these are all rollovers (from pre-tax 401K) such that all funds in the consolidated 401K are pre-tax, then there is, in essence, no such thing as a cost basis (you can know your cost basis as trivia, but that is the extent of the use).
All money coming out of the 401K (or a future rollover tIRA) will be taxed as income in the year withdrawn. There is no differentiation between contributions and gains. Or capital gains vs. dividends. It is all taxable cash as far as the IRS is concerned.
All money coming out of the 401K (or a future rollover tIRA) will be taxed as income in the year withdrawn. There is no differentiation between contributions and gains. Or capital gains vs. dividends. It is all taxable cash as far as the IRS is concerned.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
Re: Moving Rollover IRA into 401k , cost basis to worry about ?
Sounds like you are right. If none of the money has ever been taxed, such as from non-deductible contributions to IRA, there is no basis and it is all just waiting to be taxed at withdrawal.indexlover wrote:Am i right about the cost basis assumption ?
Link to Asking Portfolio Questions
-
- Posts: 76
- Joined: Sat Jan 28, 2017 11:53 am
Re: Moving Rollover IRA into 401k , cost basis to worry about ?
On the other hand: I have a tIRA with some basis (after tax contributions). How do I handle the rollover from the tIRA to my employer's 401(k)? My employer's 401(k) does track after-tax contributions, so: perhaps I can just specify the basis, so it can continue to be tracked? Has anyone done this before? Has your employer handled it as described?
Thanks for any insight anyone can provide!
Re: Moving Rollover IRA into 401k , cost basis to worry about ?
I found this paragraph at the site below:BoglePablo wrote: ↑Sat Apr 07, 2018 10:27 pmOn the other hand: I have a tIRA with some basis (after tax contributions). How do I handle the rollover from the tIRA to my employer's 401(k)? My employer's 401(k) does track after-tax contributions, so: perhaps I can just specify the basis, so it can continue to be tracked? Has anyone done this before? Has your employer handled it as described?
Thanks for any insight anyone can provide!
"Currently, 69 percent of company 401(k) plans allow workers to bring IRA money to them, according to the Plan Sponsor Council of America, an employer group. Workers can only move IRA money that was seeded with pre-tax dollars, either via a rollover from an earlier 401(k) or from contributions that were originally tax-deductible when they were made to the IRA."
https://www.reuters.com/article/column- ... U420140409
A good idea would be to talk to your plan administrator.
Re: Moving Rollover IRA into 401k , cost basis to worry about ?
You transfer all but the basis to the 401k if they will accept it. Then convert the remainder of the IRA to Roth with little to no tax. This leaves you with nothing in any tIRA.BoglePablo wrote: ↑Sat Apr 07, 2018 10:27 pm On the other hand: I have a tIRA with some basis (after tax contributions). How do I handle the rollover from the tIRA to my employer's 401(k)?
You are not allowed to roll IRA basis into a 401k. To my knowledge, the fact that the 401k holds and tracks after tax money does not change that.My employer's 401(k) does track after-tax contributions, so: perhaps I can just specify the basis, so it can continue to be tracked? Has anyone done this before? Has your employer handled it as described?
Last edited by retiredjg on Sun Apr 08, 2018 11:07 am, edited 1 time in total.
Link to Asking Portfolio Questions
-
- Posts: 13977
- Joined: Fri Mar 02, 2007 1:39 pm
Re: Moving Rollover IRA into 401k , cost basis to worry about ?
As previously stated, you are only allowed to rollover pre-tax IRA assets to a 401k.
Only after-tax contributions from another qualified plan can be rolled over and tracked in a 401k.
Only after-tax contributions from another qualified plan can be rolled over and tracked in a 401k.
Re: Moving Rollover IRA into 401k , cost basis to worry about ?
Subtle, but your wording is much more precise than mine.
Link to Asking Portfolio Questions