Skip to main content
Message Font: Serif | Sans-Serif
No. of Recommendations: 2
vkg wrote,

The conversion of the 401K after-tax needs to be done before the roll-over.

To which aj485 wrote, No, you can roll the after-tax contributions in a 401(k) directly to a Roth IRA.

In fact the IRS permits you to split any after-tax contributions (cost-basis) from the earnings when you roll the funds out of a 401(k). So if you call your 401(k) provider and ask for a rollover of after-tax funds, you should have the option to rollover the original contributions to a Roth IRA and simultaneously roll any earnings into a Traditional IRA.

I know for a fact that Fidelity is capable to executing such a rollover. This shouldn't require any input from your (previous) employer and it shouldn't be something the plan has to explicitly permit.

The IRS actually issued a notice about this ability in 2014.

In addition this fact is covered here in on the IRS website:

Specifically this page says:

Can I roll over my after-tax contributions to a Roth IRA and the earnings on my after-tax contributions to a traditional IRA?

Yes. Earnings associated with after-tax contributions are pretax amounts in your account. Thus, after-tax contributions can be rolled over to a Roth IRA without also including earnings. Under Notice 2014-54, you may roll over pretax amounts in a distribution to a traditional IRA and, in that case, the amounts will not be included in income until distributed from the IRA.

This splitting of contribution amounts from the earnings allows you to avoid incurring additional taxes on future earnings without incurring any additional taxes in the current tax year.

- Joel
Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
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.