Planning Ahead: Rollover Strategies [401(k)]

My mixed 401(k) at Fidelity contains both Roth (not-taxable) and
non-Roth (tax-deferred) contributions. A few years ago a Fidelity rep
told me that throughout retirement I would not be able to make
separate withdrawals from one of these account types, or the
other; that my withdrawals would be mixed with a ratio proportionate
to my holdings among these two distinct tax categories.

[True?]

To override this situation, and give me more choice, might I simply
roll over my 401(k) into two separate IRA accounts at Fidelity — Roth
and non-Roth — containing equivalent holdings? [I’m aware that I
might have to convert some “advisor” class funds that are only
available within the 401(k) plan].

The advantage (and purpose) of this split would be to allow
independent withdrawals among these two categories, giving me precise
control over my tax situation, e.g.,allowing tax-free Roth
contributions to grow . . . or, conversely — and perhaps preferably
— making tax-free withdrawals from the Roth IRA [formerly Roth
401(k)] while letting the taxable non-Roth funds accrue gains whose
tax — for my beneficiaries — would be erased by the step up in cost
basis at my death.

Is this a viable plan? Any foreseeable red flags, or snafus?

PS I’m new here [and 57, still pre-retirement]; just trying to plan ahead 😉
If this has been asked/answered before, then please simply send me a referral/link.
Thank you!



  • The withdrawal restriction you describe is a plan specific provision. I believe the TSP also contains this restriction, and the solution to it is an IRA rollover either prior to retirement to the extent permitted, or right after retirement. A Roth 401k also has RMD requirements which can be avoided by a rollover to a Roth IRA. In most cases, since the Roth generates tax free earnings when held to qualification, you would not want to withdraw from it unless the specific situation warrants it. As you indicated, an IRA rollover might require you to re align your investments somewhat, but there would be no current taxes due in that process.
  • There is no basis adjustment for retirement accounts upon a plan owner’s death. A TIRA distribution to a beneficiary would be taxable (less any IRA basis), while distributions from an inherited Roth would typically be tax free. Any taxable income would be subject to tax at the beneficiary’s ordinary income tax rate. 

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