Non deductible IRA rolled back into a 401k

Submitted by Eddie Ngo on Sun, 2014-06-29 19:52

If one had $100,000 in A NON DEDUCTIBLE IRA and rolled it into his 401k what are the consequences when you take it out after 59.5yrs old.

1. Eg.If you had $900,000 in the 401k, and $100,000 in a non deductible IRA, if you took a withdrawal is it 90% taxable and, 10% non taxable, hence does one if to keep it tracked.

2. If you rolled over the $100,000 non deductible IRA as above to a 401k, and the spouse has $50,000 non deductible IRA, can she the next year convert her $50,000 into a roth tax free or does she need to aggregate it with the husband’s 401k, and do spouses each stand on their own retirement assets.



Submitted by mk foss on Sun, 2014-06-29 22:45

  1. IRA basis cannot be rolled into a 401k plan. So if you have a nondeductible IRA, only the earnings in the account can be rolled to a 401k.
  2. Retirement plans are never joint. Each spouse has their own plan.
  3. When converting IRAs to Roth, you use the basis and all of the IRAs of that person (tradtional, rollover, SEP, Simple IRA – but not Roth IRAs) to determine how much of the conversion is taxable. 401k balances are not considered when converting an IRA to Roth.

Submitted by Alan - IRA critic on Sun, 2014-06-29 23:37

As indicated, IRA basis cannot be rolled into a non IRA plan. Basis is tracked by the taxpayer on Form 8606. If you are sure that you already rolled IRA basis into a 401k, the plan itself must take corrective action. If you report this problem to the plan perhaps they will distribute your IRA basis back out to you and you can re capture your IRA basis again. Otherwise, you will have made the IRA basis taxable a second time when the plan distributes it or you roll it over.

Submitted by Eddie Ngo on Wed, 2014-07-02 21:00

If a person rolls his $100,000 deductible IRA into a 401k, and over the next few years contributes to a non deductible IRA as he is over the limits in income, and he now has $50,000 in non deductible IRA, can he convert all of this to a Roth tax free as this was all non deductible, and ignore the amount of deductible IRA that was previously rolled into his 401k?If retirement plans are never joined, does that mean that a spouse that has a $100,000 in a deductible IRA, and a spouse that has $50,000 in a non dectible IRA: the spouse that has the non deductible IRA can convert all of this to a roth tax free and she does not need to aggregate the spouses’s deductible IRA?

Submitted by Alan - IRA critic on Wed, 2014-07-02 23:33

  1. Yes, the amounts previously rolled into the 401k no longer count. But the 50,000 may include earnings on the non deductible contributions. You must report the non deductible contributions as you make them on Form 8606. If the 8606 shows you made 40k in contributions and the account is now worth 50k, the 10k of earnings will be taxed if you convert all 50k.
  2. The spouse’s IRA amounts are not included in the calculations for the other spouse. There is no aggregation between spouse IRA account. In the example the spouse with the 50k could convert it tax free IF there were no earnings on the non deductible contributions.

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