Pre 1987

HI:

My client has pre-1987 money in her 401k. Total is about 15k. What is significance of this portion of account? RmDs? Thx.



Pre 1987 after tax contributions that have beenn tracked by the plan can generally be distributed separately from the rest of the after tax sub account, meaning that they could be rolled over to a Roth IRA tax free. These amounts lose significance after separation from service because all after tax amounts can be rolled to a Roth IRA then, and the pre tax earnings can be sent to a TIRA account. Also, if the taxpayer is doing back door Roth conversions, being able to leave the earnings on the pre 87 after tax contributions in the plan will eliminate having a pre tax IRA balance which would cause the back door conversion to be partly taxable.

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