Best options for rollover 401K with pre and after tax
I have a 401K with pre- and after- tax contribution. Since I left the job, I am able to roll the money out of the plan. I am 46 and with joined income over $200K. What is the best way for my after- tax? take the money or roll over to TIRA? or transfer the after- tax to a nondeductible IRA for 2010 Roth IRA conversion? Thanks.
Permalink Submitted by Marvin Rotenberg on Wed, 2009-01-07 17:15
You have outlined your options well. You could take out the after-tax money and not incur any income tax which may be helpful to you at this point. We like the Roth IRA as you know and the fact that you are age 46 makes it even better. You can as you suggested put it into a non-deductable traditional IRA the in 2010 convert to a Roth. Don’t forget the pro-rata rule. You must consider all your other IRSs that may have pre-tax money. If you don’t have any other IRAs then assuming you don’t have significant growth the tax on the conversion in 2010 could be very little. On the other hand we don’t know what the tax rates will be in 2010 but we do know that whatever tax may be due can be paid in years 2011 & 2012. Good luck.
Marvin
Permalink Submitted by Shiela Woods on Wed, 2009-01-07 19:32
Thanks, Marvin.
What is the pro-rata rule? I like the Roth IRA too. But I have only about 11K after-tax contribution and 166K in pre-tax. It may not worth the trouble.
Permalink Submitted by Mitchell Kraus on Thu, 2013-07-18 19:18
Could a client rollover their pre-tax money to a different 401(k), take their after-tax contribution into an IRA and then roll that into a Roth?
Permalink Submitted by Alan - IRA critic on Thu, 2013-07-18 20:32
Yes, if the old plan will split the amounts and the new plan will accept the rollover. If the client already has a pre tax TIRA balance, he should have the after tax portion rolled directly from the 401k to the Roth IRA, not to the TIRA first. Client could also have the after tax amount paid directly to the client and then roll it to the Roth IRA from there.