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Is it possible to convert a ROTH 401K to a ROTH IRA?

My employer's plan is going to start offering a ROTH 401K option. It isn't a plan that I want to stay in long term, but expect to retire in a few years.
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Is it possible to convert a ROTH 401K to a ROTH IRA?

Yes, but I'd call it a rollover, not a conversion. It works just like a rollover from a traditional 401(k) to a traditional IRA.

While we're on the subject of Roth 401(k)'s, an oddity that affects people approaching their 70 1/2 year. Unlike Roth IRAs, Roth 401(k)'s have Required Minimum Distributions (RMD's). Since the 401(k) must distribute an RMD before completing a rollover it's important to move the account to a Roth IRA before January 1 of the year you turn 70 1/2 if you don't want the RMD to happen.

Phil
Rule Your Retirement Home Fool
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Phil,

Thank you for the information.

I will move my 401K as soon as I leave this company. I don't plan on working at this job for more than another decade.

The 401K investment options and administrator were recently changed. It was an excellent plan, and sadly that is no longer true.

My husband was laid off just before the administrator change. His 401K was rolled over to an IRA before the new adminiatrator could get their hands on it. I was surprised the new administrator sent a letter asking why he pulled his 401K implying it was a bad decision and if the previous administrator contacted him.
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Yes, but I'd call it a rollover, not a conversion. It works just like a rollover from a traditional 401(k) to a traditional IRA.

This brings up the question to what happens if your 401k is a mixture of traditional 401k contributions and Roth 401k contributions. Do you roll the traditional portion into a traditional IRA and the Roth 401k portion into a Roth IRA? Or do you roll the whole thing into a Roth IRA and pay taxes on the traditional portion of the account?
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Do you roll the traditional portion into a traditional IRA and the Roth 401k portion into a Roth IRA?

Actually, it will probably be a three part rollover.

1.) After tax contributions to a ROTH IRA
(This was done when my husband's 401K was rolled over.
It was a separate Rollover from the pre-tax amount.)

2.) ROTH 401K to ROTH IRA

3.) Pre-tax 401K to Traditional IRA.
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I was thinking more along the lines of a traditional IRA having both pre-tax and after-tax contributions. You can't just roll the after-tax contributions into a Roth IRA. I was wonder if the same is true of 401ks.

PSU
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This brings up the question to what happens if your 401k is a mixture of traditional 401k contributions and Roth 401k contributions.

You may not see it in your periodic statements, but you actually have three accounts:

1. Roth contributions and earnings on them
2. After-tax contributions
3. Pre-tax contributions and all non-Roth earnings

1 you roll into a Roth IRA.

2 you can roll into a traditional IRA or take a tax-free distribution.

3 you roll into a traditional IRA.

Phil
Rule Your Retirement Home Fool
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Actually, it will probably be a three part rollover.

1.) After tax contributions to a ROTH IRA
(This was done when my husband's 401K was rolled over.
It was a separate Rollover from the pre-tax amount.)


Uh, no, you can't do that. Non-Roth contributions roll into a traditional IRA if they roll anywhere. You might want to look into correcting this since it's a 6% excess contribution penalty if the IRS catches on.

Here's an excellent discussion on the topic:

http://fairmark.com/retirement/roth-accounts/roth-conversion...

Phil
Rule Your Retirement Home Fool
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You may not see it in your periodic statements, but you actually have three accounts:

Good to know. Thanks.

PSU
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Uh, no, you can't do that. Non-Roth contributions roll into a traditional IRA if they roll anywhere. You might want to look into correcting this since it's a 6% excess contribution penalty if the IRS catches on.

Fidelity managed the separate transactions, and issued 1099Rs for the transactions. They said they could and would do the transfers.
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Uh, no, you can't do that. Non-Roth contributions roll into a traditional IRA if they roll anywhere. You might want to look into correcting this since it's a 6% excess contribution penalty if the IRS catches on.

Fidelity managed the separate transactions, and issued 1099Rs for the transactions. They said they could and would do the transfers.


I guess I chose bad wording. I have no doubt that it was done since you said it was. My point is that it's not allowed by tax law. I'll remind you of what I often say regarding financial service providers and tax law. There's a reason their fine print says don't rely on us.

Were I your husband I'd get an opinion from someone who knows tax law and can be held responsible. But it's his money, not mine.

Phil
Rule Your Retirement Home Fool
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I'll remind you of what I often say regarding financial service providers and tax law.

I will ask our tax preparer. She is an EA.

I didn't expect that they would be able to do such a transfer, and didn't ask about it. Fidelity offered the transaction. As a major 401K administrator, I made the assumption that they would know what is legal and not offer illegal transfers.
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It appears that they used the process of isolating transactions from the 401K. Normally I would have ask more questions, but at the time I was dealing with a death in the family and my husband was ill.
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