The Motley Fool Discussion Boards

Previous Page

Financial Planning / Tax Strategies


Subject:  Re: I Took A Pension Distribution... Date:  11/15/2013  5:52 PM
Author:  TMFPMarti Number:  119523 of 127617

and the amount fell into two categories:

- "Taxable amount to be rolled over"
- "After tax Employee Contribution amount to be rolled over"

I received two checks, one for each amount, both payable to Fidelity, for me to deposit.

Now, that first one… the taxable amount to be rolled over… is quite understandable to me. I've deposited the taxable amount into a rollover IRA.

The second check confuses me.

That's understandable.

First, you need to ignore the previous response. You cannot roll anything into a Roth IRA except funds from another Roth IRA or funds from a 401(k) Roth option. We had that discussion in depth here not terribly long ago.

You have two choices for the after-tax contribution check:

1. Deposit it into a traditional IRA. The "rollover" IRA you spoke of will do; it really doesn't matter. That amount will then become previously-taxed "basis" in your traditional IRA. Subsequently every distribution from any traditional IRA account will be a combination of taxable and previously taxed funds. You can see how it works in Part I of Form 8606.

2. Since it's made out to you and Fidelity you can return it to have it made payable only to you, but I don't recommend that since then they just might withhold. I recommend you plop it into a regular taxable Fidelity account. Then you can decide what you want to do.

You should receive one 1099-R for this distribution showing the total of the two checks as the gross distribution and the difference between the two as the taxable portion. What you will receive remains to be seen.

Rule Your Retirement Home Fool
Copyright 1996-2018 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us