IRA rollowver to 401k
I have co-mingled funds in my traditional IRA–non-deductible contributions and a pre-tax 401k rollover. My current employer’s 401k plan will allow me to rollover the pre-tax 401k money as well as the gain on the whole IRA leaving just the original non-deductible IRA contribution. Once that is completed, I want to convert the non-deductible funds in my traditional IRA to a Roth. Have I thought this through correctly? Can I do this all of this without tax consequence?
Thank you
Permalink Submitted by Alan Spross on Thu, 2010-06-10 18:47
Yes, you are correct in your plan. The only challenge is to get the employer to accept all your owned TIRA, SEP IRA and SIMPLE IRA assets in excess of your after tax basis. As soon at that transfer has been completed you should convert the remaining amount to a Roth IRA. It might gain a few bucks in the meantime, but basically your conversion will be close to fully tax free.
Of course, you must have correctly filed an 8606 for the years you made those non deductible contributions. If you did do so, you can still complete this strategy, but you will have to file all those 8606 forms retroactively, and it may take some research to reconstruct the correct years and amounts of those contributions.