After Tax 401k rollover
A client has pre-tax and after-tax contributions in his 401k Plan. He has retired and wants to roll the entire balance to an IRA. Am I correct that he would roll the pre-tax source, along with the earnings in the after-tax source to a Traditional IRA, and only the after-tax contribution amount goes into a Roth IRA?
Permalink Submitted by drex neumann on Wed, 2021-01-13 18:47
That is way I understand it. It is a good idea and if you company lets you I would recommend doing every year when you can and not wait till retirement. Also the Roth IRA has to be open 5 years along with 59.5 age so go ahead and open a Roth IRA to get the clock started and running.
Permalink Submitted by Alan - IRA critic on Wed, 2021-01-13 20:25
These two rollovers must be requested at the same time by asking that the entire pre tax plan balance be directly rolled to a TIRA and the after tax amounts to a Roth IRA. This is authorized by IRS Notice 2014-54. If the person also has a Roth 401k balance, that direct rollover to a Roth IRA can be ordered separately.