UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev | Next
Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76237  
Subject: Re: "After tax" money in 401K. Date: 2/2/2002 10:21 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Buc99 writes:

I would assume that the after tax monies are treated the way non-deductible contributions are. That is, you have a cost basis in the IRA in the amount of the after-tax monies. Withdrawals are then pro-rated and the part attributed to basis is not taxed again. This avoids penalty on these amounts, but since it is pro-rated, penalty is still possible on early withdrawals on the taxable portion. So, if you have a balance of 50,000 and the after-tax portion is 10,000, you would have a taxable (and potential penalty) amount of 80% of a withdrawal. Likewise, 20% would be tax and penalty free.

Your assumption is absolutely correct. When after-tax 401k contributions are transferred to a traditional IRA, they will be treated just like any other after-tax contribution to that IRA. That means part of any withdrawal is always taxed and part is not just as in the example you outlined.

Regards..Pixy
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev | Next

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
Post of the Day:
Value Hounds

Considerable Headwinds for Profire Energy?
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement