401K / 403B distributions from post and pre tax contributions for Roth conversion / living expenses
There two 401K plans and two 403B plans, The 401K plans have post and pre tax contributions (post tax amounts are less than 10%), whereas 403B plans only have pre tax contributions. There are several Roth IRA accounts from decades ago, and one non deductible Traditional IRA from year 2020. Age is early 60s. Would like to take distributions from 401K or 403B plans either for an in plan Roth 401K / 403B conversion, Roth conversion outside the plan, or take distributions for living expenses. Is there a specific rule for taking distributions given that there are pre and post tax contributions.
Permalink Submitted by Alan - IRA critic on Tue, 2021-02-23 22:11
Distributions can be mixed and matched. If from the same plan, generally the after tax contributions are pro rated, although the IRS issued PLR 2014-54 that allows rollovers from qualified plans to be sent to different destination accounts. The after tax amounts would go to a Roth IRA, and the pre tax amounts to a TIRA, enabling these rollovers to be non taxable. This would be a good plan for the 401k which holds some after tax amounts. A taxpayer with multiple accounts available for distributions might take a Roth distribution if there is already high taxable income in a year, or a 403b distribution or conversion if in a low bracket since those distributions will be taxable. “Portability” is the term describing the many options for rollovers between plans, and taxpayers today have many options to consolidate their accounts as they see fit, while managing the taxable income they must report for distributions in order to control current and future tax bills.