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I've maxed out my contribution of pre-tax 401k money this year. I'm trying to decide whether or not to make the allowed after-tax 401k contribution.

Basically, I'm figuring that when I leave this employer I will transfer the 401K to a rollover IRA. As far as I can tell, that IRA is then eligible to convert to a Roth IRA (if my income at that time is within the limits) - someone correct me if I'm wrong on this.

My question: Does making an after tax 401k contribution hurt my ability to later turn this to a Roth IRA? Is the after-tax contribution excluded from the taxable basis at conversion time, or do I have to pay taxes on that money again to convert it to a Roth? If I didn't convert it to a Roth, I understand that there is a provision for not re-taxing the after-tax contributions, but I thought I saw somewhere that in a Roth conversion of a previous 401k, the whole amount (including after tax dollars) gets re-taxed? Anyone more familiar with this?

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