I have either mis-read the post or you have received some incorrect information. Money in a 401(k) is comprised of essentially four pieces: before-tax contributions, earnings on the B/t contribs; after-tax contributions and earnings on a/t contribs.If you rollover your 401(k) account to an IRA, you will be paid your lifetime-to-date a/t contributions (but not the earnings thereon) in a lump sum as a non-taxable transaction. Everything else; the b/t contrib's and ALL earnings (all of which have never been taxed) are treated as unearned ordinary income subject to tax at the then prevailing ordinary rates. Further a 10% penalty may apply (but there are ways around it) depending on age.TheBadger
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