I have an existing 401k with a prior employer. The plan allowed me to contribute amounts exceeding IRS limits for tax deductibility on an after-tax basis. If I want to transfer or rollover the balance in this 401k, how are the pre- and post-tax contributions treated? My understanding is that the pre-tax contributions together with all income earned on total contributions may be rolled over or transferred into my current employer's 401k or into a conduit IRA. However, with respect to the post-tax contributions, they may not be so transferred or rolled over. In this case, is it permissible to deposit them into a post-tax (i.e., non-deductible) IRA? (I assume that withholding is not an issue, as taxes have already been paid on such amounts.) If so, are there concerns I should be aware of in pursuing this matter?
However, with respect to the post-tax contributions, they may not be so transferred or rolled over. In this case, is it permissible to deposit them into a post-tax (i.e., non-deductible) IRA? No. You have to take a cash distribution of your post-tax contributions. You pay no tax or penalty since, as you note, you've already been taxed on the income.See Publications 575 and 590.Phil MartiVITA Volunteer
As indicated, post-tax contributions must be taken as lump-sum distributions. What options are available to me in this respect to allow for continued appreciation/income on a deferred basis? Long-term buy and hold? Insurance annuity product? Other?Many thanks in advance for your suggestions.
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