The Motley Fool Discussion Boards
Financial Planning / Tax Strategies
|Subject: Re: 401k roller, basis, and ROTH||Date: 1/4/2014 1:25 PM|
|Author: TMFPMarti||Number: 119796 of 124931|
She and I were in the same plan. Same employer for a time. That's how we met.
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.
Rule Your Retirement Home Fool
|Copyright 1996-2016 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us|