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Author: mawhinney Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19414  
Subject: "After tax $" & 401k Date: 11/1/2000 10:04 AM
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My 401K account includes "after tax dollars". It is my understanding that if I move my 401K to an IRA account, the "after tax dollars" become taxable and cannot be moved into the IRA. I would need to include the "after tax dollars" in my income for the year in which I take it. Is this true?

Seems it would best to leave the 401k alone and not move it to an IRA account so the "after tax" contributions can continue to grow tax free. I have found little on "after tax dollars" on the boards. One article mentioned that it might be better once the maximum amount for the year was contributed to one's 401K to invest outside the 401K. However, I've found no mention of how to handle after tax dollars that were put in 401Ks. Any thoughts?
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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5465 of 19414
Subject: Re: "After tax $" & 401k Date: 11/1/2000 10:17 AM
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Mawhinny asks:

<<My 401K account includes "after tax dollars". It is my understanding that if I move my 401K to an IRA account, the "after tax dollars" become taxable and cannot be moved into the IRA. I would need to include the "after tax dollars" in my income for the year in which I take it. Is this true? >>

Your understanding is incorrect. When you transfer your 401k money to an IRA, the after-tax contributions will come to you in a separate check. They cannot be put in the IRA, but they have already been taxed once, so they will not be taxed again. You do not have to report the after-tax contributions as income, you will not be taxed, and you may do with it as you please.

Regards..Pixy

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Author: middlearth Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5466 of 19414
Subject: Re: "After tax $" & 401k Date: 11/1/2000 10:32 AM
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>> It is my understanding that if I move my 401K to an IRA account, the "after tax dollars" become taxable and
cannot be moved into the IRA.<<

Just Yesterday I talked to my 401K rep and she told me that upon retirement, one of the options would be to roll the 401K into a "traditional" IRA, then withdraw from it as I need to. The only time it would become taxable in whole is if you then tried to roll it into a Roth IRA. But, as long as the money does NOT pass through your hands it's still tax exempt until withdrawl. I hope this helps.
Regards,
Eddie


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Author: mawhinney Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5467 of 19414
Subject: Re: "After tax $" & 401k Date: 11/1/2000 4:29 PM
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When you transfer your 401k money to an IRA, the after-tax contributions will come to you in
a separate check. They cannot be put in the IRA, but they have already been taxed once, so they will not be taxed again. You
do not have to report the after-tax contributions as income, you will not be taxed, and you may do with it as you please.

Pixy
Thanks for your clarification. I have another question. After-tax money can be broken down into what portion is contributions and what is earnings. I read where the contribution amount cannot be transferred from a 401k plan to an IRA account. What happens to the earnings portion?

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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5468 of 19414
Subject: Re: "After tax $" & 401k Date: 11/1/2000 4:33 PM
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Mawhinney asks:

<<Thanks for your clarification. I have another question. After-tax money can be broken down into what portion is contributions and what is earnings. I read where the contribution amount cannot be transferred from a 401k plan to an IRA account. What happens to the earnings portion? >>

All earnings within the 401k will go with your pre-tax contributions to the IRA.

Regards..Pixy

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