Traditional/Roth 401(k) rollover tax question

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mathguy3021
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Joined: Sat Apr 09, 2011 9:30 pm

Traditional/Roth 401(k) rollover tax question

Post by mathguy3021 » Tue Nov 22, 2011 11:47 am

I currently have a 401(k) account that consists of both pre-tax Traditional 401(k) and Roth 401(k) contributions and earnings. My question is, after I retire or leave my employer, can I rollover the Traditional 401(k) to a Traditional IRA and also rollover the Roth 401(k) to a Roth IRA, with zero tax consequences? I think I can as long as I do a direct rollover, but I'm concerned that I won't be able to separate traditional from roth because of the way my 401(k) account is treated like one account with a mixture of pre-tax and roth money. I want to be sure that the Roth 401(k) is NOT treated like an after-tax 401(k), since I have read in many places that after tax 401(k) basis cannot be separated from a Traditional 401(k) upon trying to rollover the after-tax basis to a Roth IRA.

Default User BR
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Joined: Mon Dec 17, 2007 7:32 pm

Re: Traditional/Roth 401(k) rollover tax question

Post by Default User BR » Tue Nov 22, 2011 12:52 pm

In general, yes. See:
http://www.irs.gov/retirement/article/0 ... #rollovers

Check with the plan provider for specifics on how to do this.



Brian

Alan S.
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Location: Prescott, AZ

Re: Traditional/Roth 401(k) rollover tax question

Post by Alan S. » Tue Nov 22, 2011 2:29 pm

There should be no problem doing this. The plan must account for two totally separate sub accounts, one for the pre tax balance and the other for the designated Roth balance. The only two options for a direct rollover of the designated Roth balance are your Roth IRA or another designated Roth plan for a later employer. You will also get two totally separate 1099R forms, as the coding is different for the Roth portion.

Even if you also have after tax contributions in the pre tax 401k account, they will not be commingled in any way with your designated Roth account.

minneapples
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Joined: Fri Jun 10, 2011 10:51 am

Re: Traditional/Roth 401(k) rollover tax question

Post by minneapples » Tue Nov 22, 2011 3:12 pm

I had no problem doing just this same type of mixed conversion a year or so ago with Vanguard.

A word of warning, the tax software I used in 2010 refused to believe that this was possible and it created a lot of unpleasant downstream effects even though I had all the proper paperwork in hand. It really complicated the filing process. I think it was a Turbo Tax problem but I can't recall offhand which program I used. Just make sure that, if you use tax prep software, you understand how all the moving pieces work so that you can spot it if the program fouls it up. There was never any patch, I guess they figured it couldn't affect that many people, but it sure aggravated me.

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