rolling over post tax contribution in 401 to ROTH

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baulahaketo
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rolling over post tax contribution in 401 to ROTH

Post by baulahaketo » Tue Dec 12, 2017 1:50 pm

I have a 401A at work to which I make post tax contributions ( 5% of paycheck). I came to find out that there is a provision of inservice rollover of the post tax contribution to ROTH account? Can anybody explain this a little more? Can you rollover just the post tax contribution to a Roth IRA every year? Would this impact the annual back door ROTH contribution?

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FiveK
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Re: rolling over post tax contribution in 401 to ROTH

Post by FiveK » Tue Dec 12, 2017 2:26 pm

baulahaketo wrote:
Tue Dec 12, 2017 1:50 pm
I have a 401A at work to which I make post tax contributions ( 5% of paycheck). I came to find out that there is a provision of inservice rollover of the post tax contribution to ROTH account? Can anybody explain this a little more? Can you rollover just the post tax contribution to a Roth IRA every year? Would this impact the annual back door ROTH contribution?
This is sometimes referred to as a Mega Backdoor Roth IRA. It should not interfere with a plain ol' back door Roth.

That wiki article is brief, but more information can be found linked within it.

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Earl Lemongrab
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Re: rolling over post tax contribution in 401 to ROTH

Post by Earl Lemongrab » Tue Dec 12, 2017 2:43 pm

To give a bit of detail, you are permitted by law to roll over the contributions and any associated earnings (that's required). The plan doesn't have to allow it though, so you need to check with the administration on that first.
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baulahaketo
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Re: rolling over post tax contribution in 401 to ROTH

Post by baulahaketo » Tue Dec 12, 2017 2:53 pm

" Some 401(k)s allow for in-service distributions, allowing employees to roll over funds during employment without a triggering event". I did check with Fidelity which handles the retirement accounts. they said we do have this provision. My questions is" How do they really calculate the gains on the contribution? and does the rollover trigger any taxable event?

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FiveK
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Re: rolling over post tax contribution in 401 to ROTH

Post by FiveK » Tue Dec 12, 2017 3:09 pm

baulahaketo wrote:
Tue Dec 12, 2017 2:53 pm
My questions is" How do they really calculate the gains on the contribution? and does the rollover trigger any taxable event?
The OP mentions a "401A". The "401a" descriptor is very broad. How exactly does your plan work? E.g., do you have a choice of specific funds and can see your balance in those at any time (thus the gains would be that balance minus your contributions) or is this a pension into which you contribute and will get a fixed monthly payment later, or...?

Rollover of post-tax contributions to a Roth is non-taxable. Rollover of gains into a tIRA is non-taxable. Rollover of gains into a Roth is taxable.

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Earl Lemongrab
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Re: rolling over post tax contribution in 401 to ROTH

Post by Earl Lemongrab » Thu Dec 14, 2017 3:36 pm

baulahaketo wrote:
Tue Dec 12, 2017 2:53 pm
My questions is" How do they really calculate the gains on the contribution? and does the rollover trigger any taxable event?
They use separate accounting. Generally what that means is even you if look at your balances and is says that you have a certain amount in a fund, really some of those holdings are in different accounts. It's like if you had two IRAs, each holding some of the same mutual funds. You'd have a number for the total of all your IRAs, but also one for each. So the growth in each account will vary based on the percentage of each holding.
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