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Subject:  Re: Elementary, my dear watson Date:  2/4/2000  9:44 PM
Author:  pmarti Number:  27253 of 127753

<< I have a 401(k) still with a former employer. It's about $500,000; they tell me that if I roll it out, around $100,000 will be taxable because it was "after tax" contributions. Can you tell me the rate at which it will be taxed? (I'm currently in the ~~40% bracket, and I'm thinking that's the answer, but I don't know.) >>

You will not be taxed at all on the after-tax contributions; you've already paid tax on those amounts. You will be taxed as ordinary income on the earnings on them, plus the 10% premature distribution penalty if it applies.

<< I also have a chunk at MSDW which I'm thinking of rolling into the same self-directed IRA (at Schwab) and I assume (and I know how to parse that word) that there won't be any tax implications there, as long as I do it right. Right? >>

I don't know the chunk's nature. For that matter, I don't know what MSDW is either, but that's not important (I think). If this is not employer plan money, read up on "conduit" IRAs in the FAQ before you consider comingling it with plan money. Tainting conduit IRAs with non-plan money is legal, but it is not generally considered to be a good idea. However, the drawbacks of doing it may not be important to you.

Phil Marti
Tax Preparer
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