401k after tax contributions
Rule clarification: I am currently in my companies 401k plan and retired this year at 55. I have pretax and after tax money in the plan. Can I rollover the after tax money directly to a Roth IRA and the pretax money to a traditional rollover IRA. If so I assume that this would not be a Roth conversion and not subject to 2009 income requirements or taxes. I am trying to figure out if waiting until 2010 is a requirement for me because of the new 2010 rule because I have already made over $100k in 2009. Would the custodian Fidelity cut out two checks made out to the new IRA custodian for a Roth and Traditiaonal IRA. Please clarify if you can
Thank you,Walt
Permalink Submitted by Alan Spross on Thu, 2009-10-29 22:57
The 100,000 income limit still applies for 2009 conversions regardless of whether the conversion is tax free or not.
Moreover, the ability to separate your basis to the Roth IRA, while the pre tax amount goes to the TIRA is up in the air. There are conflicts in the way the tax code is written that causes direct rollovers of these funds to be treated differently than indirect rollovers. With a direct rollover, the pro rate rules would end up directing an equal share of both the after tax and pre tax balances to each type of IRA, and that is not what you desire to accomplish.
The American Benefits Council has just written a letter to the IRS requesting a clarification on these issues:
http://www.americanbenefitscouncil.org/documents/402f_notice_abc-cmnts_1…