? about Roth 401k Segregation of Contributions & Growth

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Megamill
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? about Roth 401k Segregation of Contributions & Growth

Post by Megamill » Tue May 07, 2019 7:54 am

Can someone explain (as if to a caveman) how a 401k provider knows how much gets rolled over to a roth IRA and how much to a traditional IRA when the time comes to do a rollover? My employer started offering the roth 401k option just a few years ago so the lion's share of my 401k is in pre-tax. Currently I am maxing out 19k to pre-tax 401k and maxing the catch-up 6k to r401k but my understanding is that these are not 2 separate accounts. All pre-tax and roth contributions are going into the same pot. So when it comes time for me to retire, will the 401k provider know how much is roth (contributions AND growth) so that I can rollover the r401k funds to my rIRA and then rollover the pre-tax 401k funds to my tIRA? Thanks in advance!

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RickBoglehead
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Re: ? about ROTH 401k Segregation of Contributions & Growth

Post by RickBoglehead » Tue May 07, 2019 7:59 am

They know now, and you can find out by either picking up the phone, or logging in and going to the proper screen.

A post in the last week discussed how Fidelity had this and you had to simply go to the correct screen. I will try and find it.
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Megamill
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Re: ? about ROTH 401k Segregation of Contributions & Growth

Post by Megamill » Tue May 07, 2019 8:02 am

Yes, I know the screen that shows Account Activity (contributions, dividends, etc) and the sources, but are they also keeping track of the actual growth (and not just the contributions)?

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Re: ? about ROTH 401k Segregation of Contributions & Growth

Post by RickBoglehead » Tue May 07, 2019 8:10 am

Megamill wrote:
Tue May 07, 2019 8:02 am
Yes, I know the screen that shows Account Activity (contributions, dividends, etc) and the sources, but are they also keeping track of the actual growth (and not just the contributions)?
Wrong screen.

You want to go to SOURCES, and click on Show Details. In Sources, it shows:

- The % that is "Salary Reduction", which is pre-tax, and the % that is ROTH, which is post tax. This is of the CURRENT BALANCE.

- ROTH Contributions. Shows the total ROTH contributions. It's pretty simple to subtract the amount that is ROTH contributions from ROTH current balance to get ROTH earnings. Of course, it's irrelevant, since all of the ROTH will be tax free.

For the taxable, since they know contributions, they know earnings. So do you, doing the simple math above. But it's not relevant, because ALL of it will be taxable since it was pre-tax.
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Megamill
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Re: ? about ROTH 401k Segregation of Contributions & Growth

Post by Megamill » Tue May 07, 2019 8:13 am

Thanks! So when it's time for the rollover, I presume that the 401k provider will know that there will be 2 rollover "paths", one to tIRA and the other to rIRA, right?

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Re: ? about ROTH 401k Segregation of Contributions & Growth

Post by 747driver » Tue May 07, 2019 11:29 am

Yes, they will know, because they keep track of the basis and everything else.
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Earl Lemongrab
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Re: ? about ROTH 401k Segregation of Contributions & Growth

Post by Earl Lemongrab » Wed May 08, 2019 9:37 pm

It's called separate accounting. There can be more subaccounts than that. If you have company contributions, then those will be in a separate account. Same if you have after-tax contributions (this is why Mega Backdoor Roth works) or rollover contributions. Most of these subaccounts have different laws and/or company rules applied to them.

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Re: ? about ROTH 401k Segregation of Contributions & Growth

Post by Alan S. » Wed May 08, 2019 10:15 pm

OK, so the 401k administrator must maintain separate accounting on several levels including the total Roth 401k balance and the pre tax 401k balance.

However, many of the statements issued to participants fail to make the actual balance amounts clear, so many people incorrectly feel that these amounts are combined. That does present a problem as it handicaps the participant when checking to be sure that there was no error made when the split Notice 2014-54 direct rollover, or other rollovers are made. The absolute last thing you want is to have Roth contributions or earnings allocated to the pre tax account, or in the rollover processing phase have some clerk misinterpret the actual accounting ledgers.

Ideally, you would want to get some assurance the figures are right prior to the rollovers, not afterwards. But this will be a challenge with some plans who might tell you that you just have to trust them. In that case, you might have to settle for the rollover amounts looking logical to you.

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Re: ? about ROTH 401k Segregation of Contributions & Growth

Post by Earl Lemongrab » Wed May 08, 2019 10:21 pm

As Alan says, not always clear. MegaCorp just shows your overall balances. It's only when you go to take a distribution that it can really come to bear. The first time I wanted to do a Mega Backdoor, I tried to take it all out of the stable value. That wasn't allowed because, even though my SV balance was more, the after-tax account had a mix of contributions. I had to draw it out from the various funds, then rebalance right after.

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Megamill
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Re: ? about ROTH 401k Segregation of Contributions & Growth

Post by Megamill » Thu May 09, 2019 10:25 pm

Yes it’s very confusing indeed. When I look at the screen that breaks out the sources it includes my contributions, both pre and post tax and employer match amount. I just want to be sure that all my Roth contributions and earnings are being correctly tracked to ensure clean rollovers to rIRA and tIRA.

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Re: ? about ROTH 401k Segregation of Contributions & Growth

Post by cavman22 » Fri May 10, 2019 12:27 pm

THis was one of my biggest gripes about vanguard when my 401k / R401k was there. I kept track of it in my own spreadsheet but never found how they did it on their website. When I left my company and they rolled it into IRA and RIRA they somehow got it right.

My current employer uses Voya and they do a much better job of separating.

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Re: ? about Roth 401k Segregation of Contributions & Growth

Post by LadyGeek » Fri May 10, 2019 1:53 pm

This thread is now in the Personal Finance (Not Investing) forum (employer plan account tracking).

I also fixed the thread title. "ROTH" is not an acronym, but the name of a US Senator. From the wiki: Roth IRA
Named after US Senator William Roth, Roth IRAs were established by the Taxpayer Relief Act of 1997.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

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