401K rollover

Submitted by Dana S on Sat, 2014-08-09 12:55

My husband has a 401K at a company that he no longer works at. He made both pre- and post-tax contributions. We are considering transferring it to two IRA accounts (i.e. x% goes to an IRA at one company and the remainder into an IRA at another company). The 401K money would be transferred in its entirety to the first IRA, and then a piece of it transferred to the second IRA from there.

What happens to the accounting of the post-tax contributions, so that that money is not taxed again once it is time to make the mandatory distributions?

Thank you.



Submitted by Alan - IRA critic on Sun, 2014-08-10 00:56

  • The total of post tax contributions rolled over to all TIRA accounts should be reported on line 2 of Form 8606 the next time an 8606 would otherwise be required to be filed. Make a note to remind him to do that somewhere where it will be seen the next time an 8606 is filed.
  • With some extra effort, it is possible to “isolate the basis”, meaning the pre tax total would go into one or more TIRA accounts but the post tax amount would go into a Roth IRA. There are several ways to do this, some more risky than others. If the post tax amount is only a couple thousand it is probably not worth the effort, otherwise it is. If he is interested in doing this please advise.

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