No. of Recommendations: 2
In the later part of 2010, I made a lot of contributions to money market account that have basically no return. This is the case for a good chunk of the after-tax 401k contributions. That is partly because I intend to roll them over to a Roth IRA next year, and I want to minimize the taxes at the time I do the rollover. It's actually better to have low/no earnings on them. My employer lets me do 1 or 2 annual in service withdrawals for the after-tax contributions.

Hi, madbrain. JAFO asked us over on the tax board to come take a look at this because he had some concerns about your understanding of the law. I'm reading only your posts to this thread in order, and have come across my first concern.

I've never heard of a 401(k) that accounted for earnings separately by source of principal. IOW, there are two pots of money in your 401(k)--after-tax contributions and everything else, which includes pre-tax contributions, employer contributions, and earnings. If you convert just after-tax contributions and you have no traditional IRA accounts lying around, there should be zero taxable income from the conversion. See the discussion beginning on page 62 of IRS Publication 590.

Have you verified with your plan that if you do a rollover of your after-tax contributions that some earnings will come along with it? If they say yes, how are those earnings calculated?

There may be more as I read on.

Rule Your Retirement Home Fool
Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
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.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! 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.