Convert to Roth IRA (After-tax 401K ==> Roth 401K ==> Roth IRA)

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dbk
Posts: 47
Joined: Sat Aug 26, 2017 2:50 am

Convert to Roth IRA (After-tax 401K ==> Roth 401K ==> Roth IRA)

Post by dbk » Fri Jan 12, 2018 8:08 pm

Hello,

I have an active Fidelity 401k to which I contributed AFTER-TAX amount of :dollar 12,962.50 in the month of December 2017. During the same time, I converted it to ROTH 401k (IN-PLAN). Since all withdrawals from 401K must meet RMD in future, I am wondering if I can convert this amount which is in ROTH 401K to ROTH IRA (in-plan or preferably, out of the plan). Please let me know if this is possible and also in general, your thoughts about this if I am walking in right path or not.

Kindly note that I am also planning to reach Fidelity on Monday to understand if this can be done.

Thank you for going through my post :happy

Lyrrad
Posts: 39
Joined: Sun Jul 27, 2008 10:59 am

Re: Convert to ROTH IRA (AFTER-TAX 401K ==> ROTH 401K ==> ROTH IRA)

Post by Lyrrad » Fri Jan 12, 2018 8:48 pm

Whether or not this can be done in service (while still employed) depends on the plan. See the summary plan description or contact the administrator to see if this can be done.

With my employer's plan, this is allowed. However, I am keeping it in the 401K plan because the plan has funds with lower expense ratios than available in my Roth IRA, Roth IRA funds can't be rolled back into the 401K, and funds in 401K plans may have better creditor protection.

CppCoder
Posts: 833
Joined: Sat Jan 23, 2016 9:16 pm

Re: Convert to ROTH IRA (AFTER-TAX 401K ==> ROTH 401K ==> ROTH IRA)

Post by CppCoder » Fri Jan 12, 2018 9:08 pm

Regardless of your ability to rollover while employed, you will be able to rollover your Roth 401k to a Roth IRA after separation. Presumably, you will do this before you reach age 70.5. Like Lyrrad, even though I can perform in-service withdrawals from my plan, I choose to keep my after-tax to Roth conversion in my 401k rather than roll it over to a Roth IRA. I will rollover to a Roth before I reach RMD age.

Spirit Rider
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Re: Convert to Roth IRA (After-tax 401K ==> Roth 401K ==> Roth IRA)

Post by Spirit Rider » Fri Jan 12, 2018 10:00 pm

RMDs are required for the year you turn 70 1/2. Just make sure you do the rollover in the year before the year you turn 70 1/2. Otherwise the RMD must occur before the rollover occurs.

dbk
Posts: 47
Joined: Sat Aug 26, 2017 2:50 am

Re: Convert to Roth IRA (After-tax 401K ==> Roth 401K ==> Roth IRA)

Post by dbk » Sat Jan 13, 2018 12:33 am

Spirit Rider wrote:
Fri Jan 12, 2018 10:00 pm
RMDs are required for the year you turn 70 1/2. Just make sure you do the rollover in the year before the year you turn 70 1/2. Otherwise the RMD must occur before the rollover occurs.
Thank you! That's a new information for me and really appreciate it. Now I am thinking to keep the amount safe in 401k (refer to Lyrrad's post) :happy

dbk
Posts: 47
Joined: Sat Aug 26, 2017 2:50 am

Re: Convert to Roth IRA (After-tax 401K ==> Roth 401K ==> Roth IRA)

Post by dbk » Sat Jan 13, 2018 1:57 am

dbk wrote:
Sat Jan 13, 2018 12:33 am
Spirit Rider wrote:
Fri Jan 12, 2018 10:00 pm
RMDs are required for the year you turn 70 1/2. Just make sure you do the rollover in the year before the year you turn 70 1/2. Otherwise the RMD must occur before the rollover occurs.
Thank you! That's a new information for me and really appreciate it. Now I am thinking to keep the amount safe in 401k (refer to Lyrrad's post) :happy
However I do see one problem - just before I turn 70 1/2, if I need to convert chunk of ROTH 401k to ROTH IRA, should I first liquidate ROTH 401K and then move the money to ROTH IRA? If so, I think such thing is bad - losing market exposure of couple days.

Lyrrad
Posts: 39
Joined: Sun Jul 27, 2008 10:59 am

Re: Convert to Roth IRA (After-tax 401K ==> Roth 401K ==> Roth IRA)

Post by Lyrrad » Sat Jan 13, 2018 3:05 am

dbk wrote:
Sat Jan 13, 2018 1:57 am
However I do see one problem - just before I turn 70 1/2, if I need to convert chunk of ROTH 401k to ROTH IRA, should I first liquidate ROTH 401K and then move the money to ROTH IRA? If so, I think such thing is bad - losing market exposure of couple days.
If you're concerned about that, if your plan allows, you could rollover 1/X of your account at a time, where X is a number you're comfortable with. My plan doesn't currently charge for these conversions so I can do as many as I want.

dbk
Posts: 47
Joined: Sat Aug 26, 2017 2:50 am

Re: Convert to Roth IRA (After-tax 401K ==> Roth 401K ==> Roth IRA)

Post by dbk » Sat Jan 13, 2018 3:27 pm

Lyrrad wrote:
Sat Jan 13, 2018 3:05 am
If you're concerned about that, if your plan allows, you could rollover 1/X of your account at a time, where X is a number you're comfortable with. My plan doesn't currently charge for these conversions so I can do as many as I want.
Thanks for your response. I am still looking for answer for one of my questions. May be I should ask it in bit details. When we roll over Roth 401k to Roth IRA, should we liquidate and then move money or can we move stock/mutual fund units as much as we want? Or, can we do either wats depending on plan?

Thanks again.

Spirit Rider
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Re: Convert to Roth IRA (After-tax 401K ==> Roth 401K ==> Roth IRA)

Post by Spirit Rider » Sat Jan 13, 2018 4:38 pm

If the plan and the rollover destination are the same custodian, often you can do in-kind rollovers is the fund is a retail fund. For example many people with Fidelity or Vanguard with both their 401k and IRAs can do this and even have the rollover happen electronically.

It they are separate custodians, they almost always will liquidate the funds (even if the funds are those of the new custodian) and send you a check made out to the new custodian for forwarding to them. I know someone with all Vanguard funds in their TPA plan and they can not do in-kind transfers to Vanguard.

In neither case do you need to do anything other than request the rollover.

dbk
Posts: 47
Joined: Sat Aug 26, 2017 2:50 am

Re: Convert to Roth IRA (After-tax 401K ==> Roth 401K ==> Roth IRA)

Post by dbk » Sat Jan 13, 2018 9:13 pm

Spirit Rider wrote:
Sat Jan 13, 2018 4:38 pm
If the plan and the rollover destination are the same custodian, often you can do in-kind rollovers is the fund is a retail fund. For example many people with Fidelity or Vanguard with both their 401k and IRAs can do this and even have the rollover happen electronically.
Ok, I have 401k with Fidelity. I will check how in plan conversion to Roth IRA would be best handled. Thanks again for your help.

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