Post Tax 401k Roll Over
A client (54) just retired. She rolled over her entire 401k to and IRA. Fidelity sent her a seperate check of $6,000 in post tax contributions. Can she just take the cash and not pay the 10% 59 1/2 penalty? Or does she need to put that in an IRA, keep records on it, and take it after 59 1/2?? Thanks.
Permalink Submitted by Alan - IRA critic on Tue, 2013-02-12 00:58
There is no penalty because there is no taxable amount. She can just keep the funds without tax or penalty or she could roll them over to a Roth IRA tax free within 60 days of receipt. Since this would be a tax free conversion, she could withdraw those funds from the Roth IRA at anytime tax and penalty free without a 5 year holding period.