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URL:  http://boards.fool.com/in-the-later-part-of-2010-i-made-a-lot-of-28987372.aspx

Subject:  Re: Poll: Did your 401k recover from the 2008 de Date:  12/28/2010  3:40 PM
Author:  TMFPMarti Number:  67993 of 76390

In the later part of 2010, I made a lot of contributions to money market account that have basically no return. This is the case for a good chunk of the after-tax 401k contributions. That is partly because I intend to roll them over to a Roth IRA next year, and I want to minimize the taxes at the time I do the rollover. It's actually better to have low/no earnings on them. My employer lets me do 1 or 2 annual in service withdrawals for the after-tax contributions.

Hi, madbrain. JAFO asked us over on the tax board to come take a look at this because he had some concerns about your understanding of the law. I'm reading only your posts to this thread in order, and have come across my first concern.

I've never heard of a 401(k) that accounted for earnings separately by source of principal. IOW, there are two pots of money in your 401(k)--after-tax contributions and everything else, which includes pre-tax contributions, employer contributions, and earnings. If you convert just after-tax contributions and you have no traditional IRA accounts lying around, there should be zero taxable income from the conversion. See the discussion beginning on page 62 of IRS Publication 590.

Have you verified with your plan that if you do a rollover of your after-tax contributions that some earnings will come along with it? If they say yes, how are those earnings calculated?

There may be more as I read on.

Phil
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