The Motley Fool Discussion Boards

Previous Page

Financial Planning / Tax Strategies

URL:  http://boards.fool.com/she-and-i-were-in-the-same-plan-same-employer-31050156.aspx

Subject:  Re: 401k roller, basis, and ROTH Date:  1/4/2014  1:25 PM
Author:  TMFPMarti Number:  119796 of 121585

She and I were in the same plan. Same employer for a time. That's how we met.

Love it!

Yes, these are after-tax contributions

With things as they stand the only thing you can do is deposit the whole check into a traditional IRA. The after-tax money is then treated like any after-tax contribution to a traditional IRA. (If you do things this way don't forget to include Form 8606 to update her basis when you file your 2014 return.)

There are options when taking a lump-sum distribution of a 401(k) with after-tax money in it, but it sounds like you told them to transfer the whole thing to her IRA. The other option would have been to take a distribution of the after-tax money and roll everything else into the IRA.

If you want to do the Roth maneuver mentioned in the link I provided it has to be a lump sum distribution of the entire account, complete with 20% withholding. Since it's so early in the year you could adjust your current withholding so that you didn't have to wait until 4/2015 to get your money back, but you'd still have to come up with the cash now to make the rollover complete.

As I said before, if you want to do something other than roll everything into the traditional IRA you'll have to see if you can "undo" the distribution and start over.

Phil
Rule Your Retirement Home Fool
Copyright 1996-2014 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us