UnThreaded | Threaded | Whole Thread (7) | Ignore Thread Prev Thread | Next Thread
Author: stoddone Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75865  
Subject: 401K directed rollover to Roth IRA question Date: 1/18/2000 2:50 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
I am about to retire and roll my 401K over to a traditional IRA. I have been contributing after tax $ to the 401K after making the maximum pre tax contributions. The company will write a check to me for the amount of after tax contributions, about 22K, since this can't be directed to a traditional IRA. My question is, is there a way I can have this 22K of after tax contributions directed to a Roth IRA??
Print the post Back To Top
Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17941 of 75865
Subject: Re: 401K directed rollover to Roth IRA question Date: 1/18/2000 3:37 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Greetings, Stoddone, and welcome. You wrote:

<<I am about to retire and roll my 401K over to a traditional IRA. I have been contributing after tax $ to the 401K after making the maximum pre tax contributions. The company will write a check to me for the amount of after tax contributions, about 22K, since this can't be directed to a traditional IRA. My question is, is there a way I can have this 22K of after tax contributions directed to a Roth IRA??>>

No, not directly there's not. The best you can do is contribute $2K to the Roth provided you have the earned income in the year to do so and you meet the Roth AGI limit for a contribution.

Regards..Pixy

Print the post Back To Top
Author: wbranson Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17947 of 75865
Subject: Re: 401K directed rollover to Roth IRA question Date: 1/18/2000 5:51 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Your question has been answered, but it makes me ask if you are sure that after-tax contributuions can't be rolled to an IRA. Why not? Annual after-tax contributions to an IRA (up to the $2,000 limit) are permitted.

Print the post Back To Top
Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17950 of 75865
Subject: Re: 401K directed rollover to Roth IRA question Date: 1/18/2000 6:47 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Wbranson asks:

<<Your question has been answered, but it makes me ask if you are sure that after-tax contributuions can't be rolled to an IRA. Why not? >>

The simple answer is the Tax Code won't permit it. Just don't ask me which section, though, because I don't recall and am too lazy to look it up. :-)

Regards..Pixy

Print the post Back To Top
Author: fishiewmn Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17962 of 75865
Subject: Re: 401K directed rollover to Roth IRA question Date: 1/18/2000 10:56 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
I don't understand why someone can't roll the 401K money into an IRA. I did it 6 years ago without a problem and was planing to do it again when I leave this job. It had to be a rollover IRA and the money had to be sent directly to the IRA not to the employee to avoid a 20% withholding. If you have the 20% withheld you need to come up with that money too or get a penalty for early withdrawal. The 20% is not your tax it would be much more so you should roll it over.
Alice

Print the post Back To Top
Author: phooley Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17965 of 75865
Subject: Re: 401K directed rollover to Roth IRA question Date: 1/19/2000 12:12 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Alice,

I don't understand why someone can't roll the 401K money into an IRA. I did it 6 years ago without a problem and was planing to do it again when I leave this job. It had to be a rollover IRA and the money had to be sent directly to the IRA not to the employee to avoid a 20% withholding. If you have the 20% withheld you need to come up with that money too or get a penalty for early withdrawal. The 20% is not your tax it would be much more so you should roll it over.

All that you say applies, but only to pretax contributions, company contributions, and the earnings on all contributions to a 401(k). What the original poster was dealing with was the question of what would happen to the post-tax contributions in a 401(k). In your case, you probably had made no post-tax contributions to your 401(k), so you didn't encounter this situation.

I performed a 401(k)-to-IRA rollover in 1998, and as I had expected, I received a check from the 401(k) administrator for the total amount of all post-tax contributions I had made. This money can come in handy, because it can be invested and ultimately result in long-term capital gains, which are taxed at a lower rate than IRA withdrawals.

Hope this helps,
Phooley

Print the post Back To Top
Author: mattpam Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 18495 of 75865
Subject: Re: 401K directed rollover to Roth IRA question Date: 1/31/2000 1:06 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
TMFPixy's answer to the original question is correct.
You cannot convert 401K assets directly to a Roth IRA.
However,you can set up an roll-over IRA with a conventional broker,online or otherwise, and instruct the Custodian of the 401K plan to deposit the 401K assets into the the roll/over IRA. This is a non-taxable transaction and no taxes are generated
until withdrawals from the IRA commence. You then have the option to roll-over IRA assets into a Roth account.
The transferred assets are then taxable at ordinary income rates in the year of the transfer. To minimize
tax impact, you could make partial transfers, spread
over several years to optimise your taxes.
Hope this helps you choose the best deal! - - Matthew

Print the post Back To Top
UnThreaded | Threaded | Whole Thread (7) | Ignore Thread Prev Thread | Next Thread
Advertisement